Raymond James: Rising Home Prices, Wages Could Be A Major Boon For Lowe's

With the home improvement industry sentiment garnering positive sentiment heading into 2018, Lowe’s Companies, Inc LOW shares are looking more attractive against key competitors and the overall market, according to a new analyst report.

The Analyst

Budd Bugatch of Raymond James upgraded Lowe’s from Market Perform to Outperform with a $87 price target.

The Thesis

Continuing home price appreciation and wage increases are an encouraging sign for homeowners to engage in discretionary household projects, in addition to ongoing maintenance and repair spending, Bugatch said in a Monday note. (See Bugatch's track record here.) 

After a strong third quarter earnings and sales beat, the home improvement industry and specifically Lowe’s are heading into 2018 with considerable momentum, the analyst said. 

“Underlying industry indicators, as well as comments from key industry suppliers, remain generally supportive of the home improvement industry moving into 2018." 

Lowe’s e-commerce segment is also showing signs of promise, with online comp sales growing 33 percent in the most recent quarter, according to Raymond James. Of online sales, 60 percent of purchases were picked up in-store, with 40 percent of online customers deciding to purchase additional items when they arrived to pick up their order.

Lowe’s management has a lot on its plate in the upcoming quarters, as the company works through a new staffing model and integrates recent acquisitions, including the recently completed $512 million acquisition of Maintenance Supply Headquarters, Bugatch said.

The company's intrinsic value now "justifies a more positive rating," he said. 

Price Action

Lowe was up 0.76 percent at $79.83 at the close Monday. 

Related Links:

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