The home improvement industry is large, worth about $900 billion and includes both do-it-yourself customers and professionals.in the meantime home depot (HD 1.21%)the biggest player in the market gets a lot of attention, the competition is small Lowes (low 1.18%) It also deserves attention from investors. In fact, Lowe’s has outperformed Home Depot over the past 3, 5, and 10-year periods.
With that said, here’s what the smartest investors know about Lowe’s stock.
strong operational performance
In its most recent quarter (Q3 2022 ended October 28), Lowe’s reported revenue of $23.5 billion, up 2.4% year over year.and adjust Diluted earnings per share (EPS) was $3.27, representing an increase of 19.8% year-on-year. Both of these numbers beat Wall Street’s expectations.Additionally, U.S. same-store sales jumped 3%.
Zoom out a bit and you’ll see a business that has shown solid growth over the years. Between fiscal year 2016 and fiscal year 2021, Lowe’s revenue increased at his compound annual growth rate (CAGR) of 8.2% and EPS increased at his impressive 28.2% CAGR. No wonder the stock is doing well.
One area that stands out in Lowe’s growth is the store count trend. Five years ago, Loews had 2,144 stores. Today, the company has a total of 1,969 stores, an 8.2% smaller footprint than his. Lowe’s has increased sales by improving volume and efficiency per store as its return on capital has risen from his 19.5% to his 27.6% over the past five years.
Despite rising inflation and rising interest rates on everyone’s mind, management felt optimistic enough to raise its full-year guidance “reflecting stronger-than-expected results.” rice field. Adjusted for 2022 Operating marginadjusted diluted EPS, and share buybacks are expected to be higher than previously forecast.
Opportunities with professionals
Like Home Depot, Lowe’s serves two types of customers. Do-it-yourself (DIY) and Professional (Pro). Home Depot gets about half of its total revenue from Pros, while for Lowe’s that number is about 25%. His current CEO of Lowe, Marvin Ellison, said he had a leadership position at Home Depot before taking his current job, so he knew somewhat about catering to professional clients such as contractors and electricians. I’m here.
It’s clear that Lowe’s growth opportunity lies in capturing market share among professionals. To this end, management has implemented key strategies such as updated store layouts, dedicated checkout lines, and a revamped Pro Rewards Program to help attract interest from this customer segment. In the most recent quarter, earnings from pros increased his 19%, marking his 10th consecutive quarter of double-digit profits from this group.
Ellison said: 2022 Third Quarter Financial Results Briefing.
Return of capital to shareholders
As I mentioned at the beginning of this article, Lowe’s stock has outperformed its larger rivals over the past few years. In fact, his stock has surged 450% over the past decade. this is, S&P 500has a total return of 218% over the same period. Despite this rise, the stock is currently trading just below 20.
While this kind of stock performance is certainly applauding, Lowe’s is aggressive about returning excess capital to shareholders. The business generated $8.1 billion in operating cash flow for him in his first nine months of fiscal 2022. However, $12.1 billion of cash was used to repurchase outstanding shares, which increased earnings per share.
Another important advantage of being a Lowe’s shareholder is company dividendLowe’s has paid quarterly dividends since 1980 and has steadily increased over time. The current dividend yield is about 1.9%.
Neil Patel has no positions in any of the mentioned stocks. The Motley Fool owns and recommends Home Depot. The Motley Fool recommends Lowe’s Companies. The Motley Fool’s U.S. headquarters has a disclosure policy.