Lowe's beats top and bottom line expectations, provides cautious outlook

Lowe's Companies (LOW) reported Q4 earnings. The company was able to outpace top and bottom-line expectations but provided a cautious outlook as it sees consumer spending soften. These results were telegraphed by peer Home Depot (HD) last week. 

The stock has pulled back 2% following the results. The stock is sliding into key support at the $225-230 area. This will set up as an important read for investors. 

LOW released their fourth-quarter earnings report, showing earnings per share (EPS) of $1.77, exceeding the FactSet Consensus estimate of $1.68 by $0.09. The company faced challenges as revenues decreased 17.1% year-over-year to $18.6 billion, outpacing the consensus estimate of $18.47 billion. 

Comparable sales for the quarter decreased by 6.2%, which was better than the estimated decline of 7.13%. The decline in comparable sales for the quarter was primarily attributed to a slowdown in DIY demand and unfavorable January winter weather. However, Pro customer comparable sales remained flat.

The company's gross profit reached $6.03 billion, down 17% from the previous year but higher than the estimated $5.96 billion. Gross margin also saw a slight increase from 32.3% to 32.4%, surpassing the estimate of 32.2%. Selling, general, and administrative (SG&A) expenses as a percentage of revenue showed improvement, declining from 22.9% to 21% year-over-year, meeting expectations. The operating margin improved from 7.59% to 9.07% year-over-year, in line with the estimated 9.04%.

Lowe's also announced guidance for the full year 2025, expecting earnings per share (EPS) of $12.00 to $12.30. This guidance falls short of estimates of $12.68 per share. The company expects comparable sales to decrease by 2% to 3%, which is more than the estimated decline of 1.14%. Operating margin is guided to be between 12.6% to 12.7%, falling short of the estimate of 13%. Capital expenditures are projected to be about $2 billion, slightly higher than the estimate of $1.94 billion. Total sales for the year are expected to be between $84 billion to $85 billion, below the estimated $85.61 billion. 

Looking ahead, Lowe's provided guidance for the fiscal year 2025. They anticipate EPS to be between $12.00 and $12.30, excluding non-recurring items, falling below the FactSet Consensus estimate of $12.68. Comparable sales are expected to decrease by 2% to 3%, more significant than the estimated decline of 1.14%. The company projects an operating margin of 12.6% to 12.7%, which falls short of the estimate of 13%. Capital expenditures are projected to be around $2 billion, slightly higher than the estimated $1.94 billion. Additionally, Lowe's expects total sales for the fiscal year 2025 to be between $84 billion and $85 billion, lower than the estimated $85.36 billion.