Earnings Analysis: Lowe’s Cos. (NYSE:LOW)

Page 1 of 2

Earnings Analysis: Lowe’s Cos. (NYSE:LOW)Lowe’s Companies, Inc. (NYSE:LOW) recently reported its preliminary financial results based on which we provide a unique peer-based analysis of the company. Our analysis is based on the company’s performance over the last twelve months (unless stated otherwise). For a more detailed analysis of this company (and over 40,000 other global equities) please visit www.capitalcube.com.

Lowe’s Companies, Inc. (NYSE:LOW) analysis versus peers uses the following peer-set: The Home Depot, Inc. (NYSE:HD), Kingfisher plc (PINK:KGFHY), Lumber Liquidators Holdings Inc (NYSE:LL), RONA Inc. (TSE:RON), KOMERI CO., LTD. (TYO:8218), Hornbach-Baumarkt-AG (ETR:HBM), DCM Holdings Co., Ltd (TYO:3050) and Bricorama SA (EPA:ALBRI). The table below shows the preliminary results along with the recent trend for revenues, net income and returns.

Quarterly (USD million) 2012-10-31 2012-07-31 2012-04-30 2012-01-31 2011-10-31
Revenues 12,073.0 14,249.0 13,153.0 11,629.0 11,852.0
Revenue Growth % (15.3) 8.3 13.1 (1.9) (18.5)
Net Income 393.0 742.0 524.0 319.0 223.0
Net Income Growth % (47.0) 41.6 64.3 43.0 (72.9)
Net Margin % 3.3 5.2 4.0 2.7 1.9
ROE % (Annualized) 10.8 19.8 13.2 7.7 5.3
ROA % (Annualized) 4.6 8.2 5.9 3.8 2.6

Valuation Drivers

Lowe’s Cos.’s current Price/Book of 2.9 is about median in its peer group. LOW-US achieved a better operating performance than the median of its chosen peers (ROE of 12.7% compared to the peer median ROE of 8.8%) and the market still expects faster growth from it than from those peers (PE of 21.6 compared to peer median of 11.0).

The company’s asset efficiency (asset turns of 1.5x) and net profit margins of 3.9% are both median for its peer group. LOW-US’s net margin is similar to last year’s low of 3.6%, which compares to the 2008 high of 5.8%.

Economic Moat

Changes in the company’s annual top line and earnings (2.9% and -9.3% respectively) generally lag its peers. This implies a lack of strategic focus and/or inability to execute. We view such companies as laggards relative to peers.

LOW-US’s return on assets is above its peer median both in the current period (5.8% vs. peer median 4.2%) and also over the past five years (6.7% vs. peer median 4.4%). This performance suggests that the company’s relatively high operating returns are sustainable.

The company’s gross margin of 34.5% is around peer median suggesting that LOW-US’s operations do not benefit from any differentiating pricing advantage. In addition, LOW-US’s pre-tax margin of 6.2% is also around the peer median suggesting no operating cost advantage relative to peers.

Growth & Investment Strategy

While LOW-US’s revenues growth has been around the peer median in recent years (1.3% vs. 1.3% respectively for the past three years), the market gives its shares a higher than peer median PE ratio of 21.6. The market seems to see faster growth ahead.

LOW-US’s annualized rate of change in capital of 0.06% over the past three years is less than its peer median of 1.6%. This investment has generated a peer median return on capital of 7.7% averaged over the same three years. The median return on capital investment on a relatively lower investment suggests that the company is under investing.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

5 Best States for Golf Adventures

Top 15 Places To Visit Before You Die

10 Most Expensive Smartphones in the World

10 States with Lowest Physician Density

10 Top Reasons For Getting Fired

The 3 Best States to Start an LLC

10 Jobs That Allow You to Travel

7 High-Paying Jobs You Can Do From Home

12 Best Cities to Shop in USA

10 Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!