On Wednesday, Wolfe Research increased its price target for Lowe's Companies Inc. (NYSE: NYSE:LOW) shares, setting the new goal at $308.00, up from the previous target of $267.00. The firm has reiterated its Outperform rating on the stock.
The decision to raise the price target is based on a forward-looking valuation, moving from a year-end 2024 to a year-end 2025 target. Wolfe Research applies a 23x multiple on their Fiscal Year 2026 earnings per share (EPS) estimate of $13.41 to arrive at the new price target.
Lowe's, known as one of the largest home improvement retailers, has a business model that attracts a larger proportion of Do-It-Yourself (DIY) customers compared to its competitor Home Depot (NYSE:HD). The sales mix at Lowe's is reported to be 75% DIY and 25% professional, which is a contrast to Home Depot's even split between the two. This distinction makes Lowe's stock more sensitive to consumer sentiment and the overall home improvement cycle.
The sector has seen low sentiment due to concerns about the home renovation end markets and a reversion from the heightened consumption levels experienced during the pandemic. However, Wolfe Research suggests that the current valuations are fair, and believes that much of the downside risk has been accounted for in the stock's price, with the industry growth outlook already set below historical compound annual growth rates (CAGR).
Wolfe Research has also provided updated EPS estimates for Lowe's. For the years 2024, 2025, and 2026, the estimates are $11.87 (previously $11.80), $12.43 (previously $12.74), and $13.41 (a new estimate), respectively. These figures are said to be in line with the consensus estimates.
In terms of valuation, Lowe's shares are currently trading at approximately 21 times next twelve months (NTM) earnings. This is compared to the 10-year historical average of about 18 times, indicating a higher valuation in the current market.
In other recent news, Lowe's Companies, Inc. reported a revenue beat this quarter, partly attributed to hurricane-related sales and a high-single digit growth in its professional customer segment. DA Davidson trimmed Lowe's price target to $270 from $273, maintaining a Neutral rating. Despite a slight year-over-year decline in net sales, Lowe's surpassed both Goldman Sachs (NYSE:GS) and consensus estimates with an adjusted earnings per share (EPS) of $2.89. The company also updated its 2024 earnings per share guidance to a range of $11.80 to $11.90, aligning with current street estimates.
UBS maintained its Buy rating on Lowe's, increasing the stock's price target from $290.00 to $300.00, while Baird reaffirmed its Outperform rating with a $295.00 price target. Jefferies also raised the price target for Lowe's to $301, maintaining a Buy rating. However, Stifel held its Hold rating on Lowe's with a steady price target of $265.00.
InvestingPro Insights
Lowe's Companies Inc. (NYSE: LOW) continues to demonstrate financial resilience and shareholder value, as highlighted by recent InvestingPro data. The company's market capitalization stands at $147.08 billion, reflecting its significant presence in the Specialty Retail industry. With a P/E ratio of 22.69, Lowe's is trading at a premium compared to some peers, which aligns with Wolfe Research's optimistic outlook and increased price target.
InvestingPro Tips reveal that Lowe's has maintained dividend payments for an impressive 54 consecutive years, with 41 years of consecutive dividend increases. This track record underscores the company's commitment to returning value to shareholders, even during challenging economic cycles. The current dividend yield of 1.77% may be attractive to income-focused investors.
Despite recent market volatility, Lowe's has demonstrated strong performance with a 29.23% price total return over the past year. This robust return, coupled with the company's high return over the last decade, supports Wolfe Research's bullish stance on the stock.
For investors seeking more comprehensive analysis, InvestingPro offers additional tips and insights, with 5 more tips available for Lowe's on the platform.
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