Lowes (NYSE:LOW) Down After Profit Guidance Misses Analysts' Expectations

Monday, May 17th, 2010

With the last couple of years being an anomaly, and not necessarily indicative of how companies will perform going forward, investors and analysts are relying on guidance from companies as to where things will be going in the near term, and guidance from Lowes (NYSE:LOW) missed expectations, with profits for the year being projected to come in at 59 cents a share, down from the 62 percent the Street was looking for.

Lowes CEO Robert Niblock said he's not expecting a rebound until 2011, as consumers aren't spending on big projects this year, and aren't likely to until next year.

He still sees growth for the year, but strong growth is still about a year away.

Home prices haven't rebounded yet, and aren't expected to bottom out in the U.S. till 2011, so consumers aren't going to put a lot of money into their homes when they won't get much out of it. Continual foreclosures and high unemployment are also part of their reluctance to spend for big ticket items or projects.

Earnings for the last quarter increased to $489 million, or 34 cents a share, from $476 million, or 32 cents share in the same quarter last year. That was actually better than the 32 cents a share analysts estimated.

If it wasn't for the lower guidance, the stock probably would have taken off, but the outlook pushed the stock down by over 3 percent today.

Same-store sales, measured by stores opened for at minimum of 13 months, enjoyed growth for the first time in 15 quarters, rising by 2.4 percent. Lowes had thought it would at best be level or down by 2 percent, so that was a positive sign for them.

Lowes Larry Stone, president and chief operating officer, said on the conference call that the company was led in the last quarter by the sales of outdoor power equipment. That was a nice boost, but it's very seasonal, and the company doesn't see that giving them impetus to push forward in home repair projects. That seems to imply that consumers spend on the needs of the season, but are holding off on major repairs, which is where most of the money is made, especially from their lumber department.

Lowes did raise their estimates on earnings for the full year, increasing it to a low of $1.37 a share, up from former estimates of $1.30. That was still far below the $1.45 a share analysts projected.

Article by Gary B

The views expressed are the subjective opinion of the article's author and not of FinancialAdvisory.com

Tags: earnings report , guidance , home repair , lowes

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