Lowe’s Companies Inc (LOW, Financial) reported its fourth quarter 2014 results with both revenue and earnings beating analyst expectations. This made the stock move to new highs. The company was glad to register another strong quarter in terms of impressive comparable sales growth. The home improvement chain expects the current year to see continuous improvement, but is a bit concerned regarding economic pressure and uncertainty. Let’s dissect Lowe’s quarter numbers and see what to expect from the company in the current fiscal year.
The quarter in a snapshot
Lowe’s released its quarter earnings on Wednesday before the market opened and delighted its investors by crushing Thomson Reuters estimates with top-line growth of 7.6% to $12.5 billion. The company’s total earnings increased by a stunning 47% and stood at $450 million, compared with $306 million in the year ago quarter. Earnings per share for the period was $0.46 against an expectation of $0.44 a share.
Sales growth during the period is attributable to higher demand from retail customers, while contractors were already in good pace. The recovering economy improved the confidence of homeowners to undertake projects. The employment scenario in the economy was progressive. At least a million jobs were added in the past quarter. All this boosted the housing market and supported Lowe’s results, assisting the company to conclude the fiscal year on a good note.
Same store sales for stores opened for more than a year grew by a good 7.3% during the quarter, and around 4.3% for the whole year. Lowe’s reported $56.2 billion in revenue for the entire fiscal year with a net income of $2.7 billion, which translates to $2.71 a share. Analysts had estimated revenue of $55.98 billion and an EPS of $2.67. The company’s CEO Robert Niblock says:
“We remain focused on improving our profitability even while investing in key capabilities to drive sales growth… Our transformation is gaining momentum, and macroeconomic fundamentals are aligned for modestly stronger home improvement industry growth in 2015.”
Stacking up against competition
Fellow peer Home Depot (HD, Financial) released its fourth quarter earnings a day in advance of Lowe’s. The Atlanta, Georgia headquartered company posted better than expected numbers on the back of solid holiday sales. The company, however, notified that strengthening dollar could bear an impact on the 2015 results. In contrast, Lowe’s didn’t speak of any such concern. The company presently runs 1,840 stores in the U.S., Canada, and Mexico, whereas Home Depot operates in 2,269 locations. Lowe’s expects to open 15 to 20 stores in the fiscal year.
Looking ahead
For the current fiscal year, Lowe’s estimates earnings per share to come in around $3.29. Revenue should grow between 4.5% to 5% and same store sales to rise 4% to 4.5%. Reuters’ analysts expect the company to see its revenue grow 5% and earnings per share to come around $3.28.
Robert Niblock says he expects the momentum to continue this year with improvement in employment boosting the overall economy.
However, he did raise concerns regarding rising interest rates and its impact on the prices of house.
Also, lower gasoline prices have been fueling demand due to higher consumer disposable income. But in case oil prices start moving up, it could reduce consumer disposable income and hurt spending.
There would be headwinds, for sure, but the overall year looks quite decent.
