Lowe's Q2 earnings preview

Posted Aug 14th 2009 3:40PM by Michael Fowlkes
Filed under: Earnings Reports, Analyst Upgrades and Downgrades, Forecasts, Good news

Home improvement retailer Lowe's Companies (NYSE: LOW) will be reporting its second quarter earnings before the market opens on Monday, and there are some positive indicators that it may have been a good quarter for the company.

Over the past year, weak consumer confidence has put a strain on Lowe's, as home owners who have worried about job security and a weak housing market have put off home repair projects. As a result, Lowe's stock fell as low as $13.00 back in March, but has rebounded nicely over the past few months to its current trading price of $22.71.

There has been an increase in optimism lately that should be reflected in solid earnings for Lowe's second quarter. We have been seeing indications that the housing market has finally bottomed out, consumer confidence rose during the quarter, and unemployment actually dropped during the month of July to 9.4%. Monday's earnings numbers should reflect these factors.

Analysts are expecting to see Lowe's report earnings of 54 cents per share during the quarter. During the same period last year Lowe's reported earnings of 64 cents. During the first quarter of this year the company posted earnings of 32 cents per share.

Despite the economic slowdown over the past year, Lowe's has continued to expand its business. During the first quarter, the company added 21 new stores, and expected to open another 18 stores in the second quarter. With its expansion, Lowe's has put itself in a great position now that the housing market is stabilizing.

Yesterday the stock was downgraded by FBR Capital Markets from an "outperform" to a "market perform", mostly in reaction to the recent run up in price. Despite downgrading the stock due to price appreciation, the brokerage raised its 2009 EPS to $1.26 from $1.24 and its 2010 estimate to $1.40 from $1.34.

The stock is trading lower today, falling 2.8% to $22.64, down 67 cents.

What are your predictions for Monday's earnings numbers? Should we expect to see Lowe's put up better than expected numbers, or fall short of hitting analyst estimates?

Below is a 1 year chart on the stock so we can get a better idea of just how well the stock has rebounded over the past couple of months: