Is Lowe's (LOW) a Buy Ahead of Earnings? A Deep Dive into Earnings Expectations, Valuation, and Analyst Signals

As July 31, 2025, approaches—the date Lowe's Companies, Inc. (LOW) will report its Q2 fiscal 2025 earnings—investors are scrutinizing the company's near-term prospects. With the consensus EPS estimate standing at $4.26 for the quarter (up 3.83% year-over-year), the stock's valuation metrics, and mixed analyst signals, the question remains: Is LOW a buy ahead of earnings? This analysis evaluates the interplay of earnings expectations, valuation indicators, and Zacks Rank insights to determine whether the stock warrants a place in a forward-looking portfolio.

Earnings Expectations: A Cautious Optimism

Lowe's has historically delivered consistent earnings, with an average surprise of +3.2% over the past year. For the current quarter, analysts expect $4.26 in EPS, reflecting a modest improvement from $4.10 in Q2 2024. However, the path to this estimate has been uneven. Over the past 90 days, 16 analysts have downgraded their forecasts for the next quarter, while 9 have upgraded them, signaling a cautious outlook. The consensus for the full fiscal year 2026 is $12.24 per share, with revenue projected at $84.38 billion—a 2.5% earnings growth and 0.84% revenue growth compared to 2025.

The Zacks Rank system, which tracks earnings estimate revisions, reveals a nuanced picture. While the company's rank of #3 (Hold) suggests a neutral stance, recent upward revisions to the 2026 consensus (from $12.24 to $12.30) indicate improving confidence. This contrasts with the next quarter's estimate, which has seen a slight downward trend, hinting at potential near-term challenges. Investors should watch for any surprises in July's report, as a beat could catalyze upward revisions and a re-rating of the stock.

Valuation Metrics: Is LOW Undervalued?

Lowe's currently trades at a Forward P/E of 18.44, significantly below the home improvement industry's average of 21.3. This suggests the stock is trading at a discount relative to its peers, even as it projects modest earnings growth. The PEG ratio of 2.09 further contextualizes this discount, indicating that investors are paying a premium for growth compared to the industry average of 2.24.

The company's valuation appears attractive for long-term investors, particularly given its consistent free cash flow generation and stable demand for home improvement products. However, the discount may also reflect skepticism about near-term execution, especially in a macroeconomic environment marked by inflationary pressures and shifting consumer spending habits. A positive earnings surprise could narrow the valuation gap, but a miss might extend the discount.

Zacks Rank Signals: A Mixed Bag of Guidance

The Zacks Rank system, a short-term indicator, assigns LOW a #3 (Hold) rating. This rank is based on the net number of upward vs. downward earnings estimate revisions over the past 90 days. While the system is designed to identify short-term outperformers, LOW's #3 rating suggests limited upside in the immediate term.

However, the Zacks Recommendation system—a longer-term tool—offers a more nuanced view. With a consensus growth rate of 2.5% for 2026 and a stable revenue outlook, the company's long-term fundamentals remain intact. Analysts have also noted Lowe's strong balance sheet and disciplined cost management, which could insulate it from macroeconomic headwinds.

The key takeaway here is the divergence between short-term and long-term signals. While the Zacks Rank #3 implies a cautious approach, the upward revisions to 2026 estimates and the company's historical earnings performance suggest a potential inflection point. Investors should consider the broader context: LOW's recent upgrades in full-year estimates indicate improving confidence, even if near-term risks persist.

Investment Implications: Timing the Trade

For investors considering a position in LOW ahead of earnings, the decision hinges on three factors:
1. Earnings Surprise Potential: A beat on the $4.26 estimate could drive upward revisions and a re-rating of the stock, particularly if it demonstrates resilience in a challenging economic environment.
2. Valuation Attractiveness: The stock's current discount to peers offers a margin of safety, but investors should monitor whether macroeconomic conditions justify this gap.
3. Analyst Sentiment Shifts: If the Zacks Rank upgrades to #2 (Buy) post-earnings, it could signal a turning point in momentum. Conversely, a downgrade to #4 (Sell) would warrant caution.

Given the mixed signals, a measured approach is advisable. Aggressive investors might consider a small position ahead of the report, with a stop-loss at key support levels. Conservative investors should wait for the earnings print and subsequent analyst revisions before committing capital.

Conclusion: A Hold with Potential

Lowe's (LOW) occupies a middle ground in the investment spectrum. While its earnings expectations and valuation metrics present compelling arguments for a buy case, the Zacks Rank's #3 rating and mixed analyst sentiment underscore near-term uncertainty. The company's long-term fundamentals remain robust, but the near-term outlook is clouded by macroeconomic risks and cautious revisions.

For those with a medium-term horizon, LOW could serve as a defensive play in a diversified portfolio, particularly if earnings exceed expectations. However, investors should treat the stock as a hold for now, using the July 31 report as a catalyst to reassess positioning. In the end, the true test will be whether Lowe's can translate its earnings strength into sustained momentum in a competitive and volatile market.