Lowe's Stock Falters Despite Beating Earnings: What's Behind the Drop?

Lowe's (LOW) stock is down 4% today, despite beating earnings and revenue estimates for the third quarter. The home improvement retailer reported adjusted earnings per share (EPS) of $2.89, surpassing the $2.82 consensus estimate, and revenue of $20.17 billion, ahead of the $19.95 billion expectation. However, both EPS and revenue were down year-over-year, and a 1.1% same-store sales decline weighed on investor sentiment.



The decline in Lowe's stock can be attributed to several factors. First, the company's sales and earnings were down year-over-year, with EPS falling to $2.99 from $3.06 and revenue dropping to $20.17 billion from $20.47 billion. Additionally, a 1.1% same-store sales decrease, driven by softness in big-ticket DIY discretionary demand, further contributed to the stock's decline.



Lowe's revised guidance for the full year also played a role in the stock's performance. The company now expects total sales of between $83 billion and $83.5 billion, up from its previous guidance of $82.7 billion to $83.2 billion. However, it still anticipates a 3% to 3.5% decline in comparable sales, which is a slight improvement from its earlier projection of a 3.5% to 4% drop.



Competition from Home Depot (HD) may also be a factor in Lowe's stock performance. Home Depot reported declining comparable sales for the eighth consecutive quarter, with customers deferring bigger projects due to interest rates and economic uncertainty. However, Home Depot saw improving sales trends from hurricane-related demand and warm-weather projects.



Despite the challenges, Lowe's remains well-positioned to capitalize on the expected recovery in home improvement. The company's focus on growth and productivity initiatives, such as its upcoming analyst and investor conference, underscores its confidence in the future of the home improvement market.

In conclusion, Lowe's stock decline today can be attributed to a combination of factors, including year-over-year sales and earnings declines, a same-store sales decrease, and revised full-year guidance. While the company beat earnings and revenue estimates, investors focused on the softer aspects of the report, driving the stock down 4% as of mid-session Tuesday. As Lowe's continues to navigate the current headwinds, investors will be watching for signs of a recovery in the home improvement market.