Wedbush Upgrades Lowe's, Says It Can Win From Low Interest Rates

In a report published Monday, Wedbush analyst Seth Basham upgraded the rating on Lowe's Companies, Inc. LOW from Neutral to Outperform, while raising the price target from $80 to $82. The analyst expects the positive drivers for the company to continue, if not increase, going forward. "LOW is harvesting benefits from years of investments and benefitting from increasing share loss at Sears Holdings Corp. SHLD and macro tailwinds. Barring a spike in interest rates, we believe these positive drivers should persist, if not intensify, with notable underappreciated benefits from an easing credit environment to housing and home improvement," Basham explained. In addition, the lower than expected earnings reported for 1Q15 drove a pullback in the stock, offering an attractive entry point for investors, especially given that the company is expected to narrow the comp gap with Home Depot, Inc. HD in the near future. This, the analyst believes, has historically been a sign of outperformance. "Moreover, LOW's earnings should move significantly faster than HD's in the next three years if LOW can meet its guidance, pointing to the potential for a premium valuation vs. HD compared to the current discount levels," the Wedbush report suggested. In addition, the analyst expressed optimism regarding Lowe's Companies' internal initiatives to boost sales and margins, with a special focus on labor optimization.