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Wedbush On Lowe's: 'A New Day' Has Arrived

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Wedbush On Lowe's: 'A New Day' Has Arrived

Lowe's Companies, Inc. (NYSE: LOW) this week hosted an analyst day presentation in which management, under new CEO Marvin Ellison, offered a "compelling roadmap" of growth, according to Wedbush.

The Analyst

Wedbush's Seth Basham maintains a Neutral rating on Lowe's with an unchanged $95 price target.

The Thesis

Basham said Lowe's management offered a "reasonable" 2019 guidance of around 2 percent sales growth, 3 percent comps, 30 basis points of operating margin leverage to 9.6 percent and also announced the exit of its Mexican retail operations and several non-core U.S. operations. The company also offered a path to lift operating margins to 12 percent in the medium-term on only 10 percent growth in sales per square foot.

Management's roadmap implies a potential for $10 per share in earnings power, which Basham said represents an 80 percent increase off a re-based $5.50 EPS estimate in 2018. The $10 in EPS potential also marks notable upside to Wedbush's bull case model and can be attributed to a "deeply experienced" management team with the necessary expertise in bringing the right changes.

The bullish case for Lowe's stock can't yet be justified as the company's encouraging outlook comes at a time of a "less sanguine" macro environment, the analyst wrote in the note.

Price Action

Lowe's was trading higher by 2 percent Thursday afternoon to $93.91 per share.

Related Links:

Citi Is A Believer In Lowe's Turnaround Plan: 'We Think The Stock Has Upside From Here'

Credit Suisse Downgrades Home Depot, Lowe's On Reduced Upside Projections

Photo courtesy of Lowe's.

Latest Ratings for LOW

DateFirmActionFromTo
Feb 2021Gordon HaskettUpgradesAccumulateBuy
Feb 2021Wells FargoMaintainsOverweight
Feb 2021KeyBancDowngradesOverweightSector Weight

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