|Bid||100.90 x 1100|
|Ask||110.79 x 2200|
|Day's range||101.39 - 103.32|
|52-week range||75.36 - 117.70|
|Beta (3Y Monthly)||1.71|
|PE ratio (TTM)||21.55|
|Earnings date||20 Nov 2018|
|Forward dividend & yield||1.92 (1.82%)|
|1y target est||121.61|
Today, CNBC reported that Credit Suisse downgraded Home Depot (HD) stock from “outperform” to “neutral.” Credit Suisse lowered its price target from $222.00 to $204.00. The new price target represents an upside potential of 5.4% from its October 16 closing price of $193.58.
Home improvement has been a winner for some time, but Credit Suisse warns good things can’t go on forever.
Lowe’s (ticker: LOW) has the best chance in more than a decade to close the gap with (HD) (HD), says Wedbush. Where we were: Lowe’s has long trailed behind its bigger rival, in large part due to self-inflicted problems. Where we’re headed: New leadership and shareholder activism may finally be the catalysts Lowe’s needs to make necessary changes, says Wedbush.
RH (RH) shares defied the general market trend and rose ~10% on October 11 following the company’s announcement to buyback shares worth $700 million. RH is expected to generate more than $260 million in cash flows in 2018. The company’s decision to announce the share buyback reflects Gary Friedman’s, RH’s chairman and CEO, view that the company’s shares are “undervalued.” Following the announcement, Stifel upgraded RH stock to “buy” from “hold” and raised the target price to $150 per share from $142.
About $3 billion of that will fall on the federal flood insurance program and private insurers may get hit with $9 billion to $10 billion in claims, according to Chuck Watson, a disaster modeler with Enki Research in Savannah, Georgia. “Unlike several recent bad storms like Harvey, Florence, Michael is a traditional hurricane event where the most intense damage is in a narrow swath along the coast and along the track of the storm caused by either wind, waves or storm surge,’’ Watson said.
Lowe's (LOW) witnesses sturdy comps growth. Further, the company expects to benefit from opportunities in the home improvement market.
Of the 33 analysts that follow Lowe’s, 81.8% have given it a “buy” rating, and the remaining 18.2% have given it a “hold.” On average, analysts have a price target of $121.04, which represents a return potential of 8.3% from its stock price of $111.75. Of the 35 analysts covering Home Depot (HD), 77.1% have given it a “buy” rating, and the remaining 22.9% have given it a “hold.” On average, analysts have set an average price target of $215.47, which represents a return potential of 5.8% from its current stock price of $203.74.
Of all the available valuation multiples, we’ve opted for the forward PE multiple due to the high visibility of home improvement companies’ earnings. A forward PE multiple is computed by dividing a company’s stock price by analysts’ earnings’ estimates for the next four quarters.
Yyear-to-date, Lowe’s (LOW) stock has risen 20.2% due to optimism surrounding CEO Marvin Ellison’s turnaround initiatives. Ellison, who joined Lowe’s as its CEO in July, has simplified the company’s organizational structure and made some important leadership appointments. In the first half of 2018, Lowe’s posted revenue of $38.25 billion, which is a 5.2% rise from $36.4 billion in the first half of 2017.
In this series, we’ll look at the performances of five home improvement companies—Home Depot (HD), Lowe’s (LOW), RH (RH), Williams-Sonoma (WSM), and Bed Bath & Beyond (BBBY)—in the first half of 2018. We’ll also cover management guidance and analyst expectations for 2018. Finally, we’ll look at these companies’ valuation multiples and analyst recommendations.
Lowe’s (LOW) stock reacted positively to SunTrust Robinson’s upgrade on September 28. On the day, the company’s stock price rose to a high of $117.70, a new 52-week high, before closing at $114.82, which represents a rise of 0.3% from its previous day’s closing price.
On September 28, SunTrust Robinson Humphrey upgraded Lowe’s (LOW) from “hold” to “buy” and raised its price target from $110 to $138. The new price target represents a return potential of 20% from its stock price of $114.52. Barron’s reported that Keith Hughes of SunTrust Robinson said that Lowe’s stock could rise 50% if the company manages to reclaim half of the difference between its SG&A (selling, general, and administrative) expenses and Home Depot’s expenses. It seems Lowe’s problems are more internal rather than as a result of competition.
If Lowe’s could get same-store sales up to Home Depot’s level, it would improve stock perception, but real earnings power will come from internal moves.
Can Lowe’s Upward Momentum Continue? Of the 33 analysts that follow Lowe’s (LOW), 78.8% recommended a “buy” as of September 18, while 21.2% recommended a “hold.” On the same day, analysts set an average target price of $118.82, which represents a return potential of 2.8% from its stock price of $115.55. Since the announcement of Lowe’s second-quarter earnings on August 22, UBS, Raymond James, Stifel, SunTrust Robinson, Jefferies, Wedbush, and RBC have all raised their target prices. Wedbush raised its target price from $92 to $105.
For the next four quarters, analysts expect Lowe’s (LOW) to post an EPS of $5.42, which represents 7.3% growth from $5.0 in the same four quarters the previous year.
Can Lowe’s Upward Momentum Continue? For the next four quarters, analysts expect Lowe’s (LOW) to post revenues of $72.79—a rise of 3.2% from $70.51 billion in the same four quarters the previous year. Accounting for the closure of Orchard Supply Hardware stores and the inventory rationalization initiative, Lowe’s management lowered its 2018 revenue growth guidance to 4.5% from the earlier guidance of 5.0%.
How Much Upside Potential Is Left in Home Depot’s Stock Price? No analysts have given HD “sell” recommendations. On average, analysts have given the stock a price target of $215.47, which represents a return potential of 3.1% from its price of $209.07.
How Much Upside Potential Is Left in Home Depot’s Stock Price? For the next four quarters, analysts expect Home Depot (HD) to post EPS of $9.94, which represents a rise of 14.4% from its EPS of $8.69 in the corresponding four quarters of the previous year. HD’s EPS growth will likely be driven by its revenue growth, the expansion of its net margin, and its share repurchases.