Following Home Depot's (HD, Financial) lead, Lowe's (LOW, Financial) reported a strong Q3 earnings, benefiting from increased demand for DIY items and a resilient Pro business. The company also saw a sales boost due to hurricane-related activities. However, the focus shifted to Lowe's guidance, which, despite an upward revision in FY25 EPS, revenue, and comparable sales, was modest and largely reflected Q3 results, suggesting a limited improvement in demand.
- Comparable sales improved to a (1.1)% decline from (5.1)% last quarter, aided by growth in the Pro business and outdoor products. However, spending on larger projects remains weak due to high interest rates affecting the housing market.
- Total sales declined by (1.5)% year-over-year in Q3, marking the seventh consecutive quarter of decline. Lowe's FY25 guidance suggests a continued decline in Q4, with an estimated revenue decrease of about 2%.
- Lowe's maintained a positive trend by exceeding EPS expectations, supported by effective cost management and share buybacks, with SG&A expenses rising just 1.7% and 2.9 million shares repurchased in Q4. The company last missed EPS estimates in Q3 2020.
The key takeaway is that Lowe's performance was overshadowed by Home Depot's prior results, setting high expectations. Investors are closely watching Lowe's updated FY25 guidance for signs of a demand recovery, but the modest forecast increase indicates that interest rate cuts have yet to significantly boost demand.
