What Happened?
Shares of home improvement retailer Lowe’s (NYSE:LOW) jumped 5.2% in the afternoon session after the company reported third-quarter earnings that beat analyst profit expectations and raised its full-year sales forecast, despite a slight revenue miss and lowered earnings guidance. The home improvement retailer posted adjusted earnings of $3.06 per share, surpassing the consensus estimate of $2.95. Total sales for the quarter were $20.81 billion, a 3.2% year-over-year increase, but just shy of Wall Street's expectation of $20.87 billion. Same-store sales, a key industry metric, were flat compared to the same period last year. Looking ahead, Lowe's increased its total sales outlook for the full year to $86 billion at the midpoint, but lowered its forecast for adjusted earnings to approximately $12.25 per share. The market's positive reaction suggested investors focused on the profit beat and higher sales guidance, weighing them more heavily than the mixed outlook.
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What Is The Market Telling Us
Lowe’s shares are not very volatile and have only had 2 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 3 months ago when the stock gained 5.2% on the news that markets continued to rally amid growing investor optimism for a Federal Reserve interest rate cut in September. This optimism was spurred by a recent Consumer Price Index (CPI) report that did not show runaway inflation, increasing the perceived probability of a rate cut to over 90%. Lower interest rates are generally seen as a positive for the economy as they reduce borrowing costs for consumers, which can stimulate spending on non-essential goods. Consequently, investors bid up shares in the apparel, home furnishings, and automotive retail industries in anticipation of stronger consumer demand.
Lowe's is down 6% since the beginning of the year, and at $232.19 per share, it is trading 15.7% below its 52-week high of $275.32 from November 2024. Investors who bought $1,000 worth of Lowe’s shares 5 years ago would now be looking at an investment worth $1,552.
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