Market Overview

Should Investors Buy Home Depot Or Lowe's? This Analyst Has The Answer

Should Investors Buy Home Depot Or Lowe's? This Analyst Has The Answer
Related HD
CME Group, Home Depot, Target: 'Fast Money' Picks For December 12
Jim Cramer Weighs In On Cisco, General Electric And More
Lowe's: Waiting For Better Value (Seeking Alpha)
Related LOW
Wedbush On Lowe's: 'A New Day' Has Arrived
Jim Cramer Weighs In On Cisco, General Electric And More
Real Estate Struggles As Markets Enter Correction (Seeking Alpha)

Lowe's Companies, Inc. (NYSE: LOW) and rival Home Depot Inc (NYSE: HD) have released their respective earnings reports, which shows Home Depot is the better company but Lowe's is the better stock to own, according to Oppenheimer.

The Analyst

Oppenheimer's Brian Nagel talked Lowe's and Home Depot during Wednesday's "Squawk Box" segment on CNBC.

The Thesis

Lowe's reported its second-quarter results, which shows its recently appointed CEO Marvin Ellison isn't wasting any time and is "getting to work" right away by streamlining the business, Nagel said. Under Ellison's leadership, the company is also closing all Orchard Supply stores it gained from a 2013 acquisition it shouldn't have made in the first place. Instead, the company will shift its focus to simply selling products that actually sell well.

In other words, Lowe's merely needs to "tweak" its business model without the need for significant investment dollars, Nagel said. As such, investors should expect to see improvements as soon as the next few quarters which makes Lowe's stock a turnaround story.

On the other hand, Home Depot is the better company today as evident by superior metrics for essentially the same business, Nagel said. For example, Lowe's has a 5-percentage point deficit in terms of operating margins, which is a "big gap." Lowe's should improve on the gap over time, which would be a key catalyst for the stock to work.

Price Action

Shares of Lowe's were trading higher by 8 percent and hit a new 52-week high of $109.80 Wednesday. Home Depot was also up, trading around $201.66.

Related Links:

How Lowe's Earnings Stack Up To Home Depot

KeyBanc Raises Lowe's Price Target, Likes Ellison's Leadership Style

Photo courtesy of Lowe's.

Latest Ratings for HD

Nov 2018Bank of AmericaDowngradesBuyNeutral
Nov 2018Credit SuisseMaintainsNeutralNeutral
Nov 2018Deutsche BankMaintainsBuyBuy

View More Analyst Ratings for HD
View the Latest Analyst Ratings

Posted-In: Brian Nagel CNBC home improvement Marvin EllisonAnalyst Color Long Ideas Analyst Ratings Trading Ideas Best of Benzinga


Related Articles (HD + LOW)

View Comments and Join the Discussion!

Latest Ratings

View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Earnings Preview: E-commerce Giant Alibaba To Report Thursday Morning

Data Say This New Retail ETF Could Be A Winner