Lowe’s said it’s well-positioned for a strong US housing market, where nearly half of the homes are more than 40 years old.

Lowe’s Cos. Says it is prepared to meet the ongoing demands of the robust housing market, where aging homes will need jobs.

Lowe’s
SHORT,
-0.71%

report fourth quarter results beat expectations on Thursday and delivered profit guidance ahead of Wall Street expectations.

On the post-earnings conference call, CEO Marvin Ellison was also upbeat about the home improvement market.

“Our outlook for the home improvement industry remains strong, supported by a very healthy consumer balance sheet, particularly for homeowners, and continued rising home prices. Consistently steady home demand despite rising interest rates is also expected to support residential investment,” Ellison said on the call, according to FactSet transcripts.

“And again, 50% of homes in the US are over 40 years old and will continue to need investment for maintenance, and about two-thirds of Lowe’s annual revenue is generated from repair and maintenance. We therefore encourage that the macro environment for home improvement remains very supportive. ”

Analysts at Truist also noted Lowe’s favorable margin strategy.

“Sales remain strong/consistent on a stacked basis, as behavioral changes focus more on housing and supply/demand imbalances,” the analysts wrote in a note. housing continued to drive meaningful home improvement growth,” the analysts wrote in a note.

“Contrary to Home Depot’s slight margin compression (although we believe investor concerns have been overstated), Lowe’s posted a significant margin increase in Q4 and further expansion is expected in 2022, as pricing and productivity initiatives continue.”

Realistically buys Lowe’s stock but slashed price target to $283 from $293.

Rival Home Depot Inc.
HD,
+ 1.25%

had a record year, but still saw its shares plummet after investors worried that demand could fall.

To watch: Home Depot sales hit record $150 billion but stock slump due to high inflation and lower-than-expected demand takes a toll

And: Home Depot tops the list of 20 worst performing companies in the S&P 500 on Tuesday

“We see Lowe benefiting from a spring rebound in the home improvement retail market, and home remodeling is expected to grow 17% by 2022,” said analysts at CFRA. .

“Lowe’s is improving its processes to increase store offering, improve operations and expand profit margins. We think the Pro segment will perform better than the DIY (DIY) segment in FY23, as affluent households push for remodeling contracts with Pro and DIYs customers. with inflationary pressures and reduced disposable income. ”

CFRA rates Lowe’s share buy with a $275 price target.

Other analysts highlight some of the challenges Lowe faces. For example, Home Depot remains the stronger of the two professional categories.

“While the outlook for stronger operating margin expansion and EPS growth is largely driven by productivity initiatives continuing to gain traction, we remain neutral on Lowe’s as well as improving retail. Home improvement with a less optimistic industry outlook for 2022 and a likely drop in traffic … foreshadows potential ticketing pressure, Wedbush wrote in a note. Wedbush has a $240 price target on Lowe’s stock, down from $260.

“We continue to prefer Home Depot over Lowe’s due to their greater exposure to the faster-growing Pro segment.”

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And Raymond James takes note of the investments Lowe’s is making in its supply chain. Ellison discussed moving to a “market-based delivery model” that moves fulfillment away from individual stores.

Raymond James evaluates Lowe’s stock market performance.

Shares of Lowe fell 1.1% on Thursday and are up 31.1% year over year. S&P 500 Index
SPX,
+ 1.16%

has increased by 8.4% in the past 12 months.

https://www.marketwatch.com/story/lowes-says-its-well-positioned-for-a-strong-u-s-housing-market-where-nearly-half-of-homes-are-more-than-40-years-old-11645722255?rss=1&siteid=rss Lowe’s said it’s well-positioned for a strong US housing market, where nearly half of the homes are more than 40 years old.

Brian Lowry

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