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Lowe's Companies Inc LOW

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Wide-Moat Lowe’s 2022 Outlook Doesn’t Sway Our Long-Term Prognosis for Sales and Profit Growth

Jaime M. Katz, CFA Senior Equity Analyst

Analyst Note

| Jaime M. Katz, CFA |

We don’t plan any material change to our $183 per share fair value estimate for wide-moat Lowe’s after including the firm’s 2022 outlook into our model. While sales are set to flatline at $94 billion-$97 billion in 2022 (below our $99 billion forecast) profitability is expected to expand, with a projected operating margin of 12.5%-12.8% (above our 12.2% estimate). These metrics consider an industry that contracts at a mid-single-digit clip in 2022, with Lowe’s outperforming the market by 300-400 basis points. However, forecasting during the pandemic has been dynamic. Recall just a year ago, Lowe’s robust scenario expected 2021 sales of $86 billion, operating margin of 12%, and an industry that contracted 5%-7%, compared with management’s reiterated update for $95 billion in sales and a 12.4% operating margin in 2021 (in line with our current forecast).    

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Company Profile

Business Description

Lowe's is the second- largest home improvement retailer in the world, operating 1,973 stores and servicing 230 dealer-owned stores throughout the United States and Canada. The firm's stores offer products and services for home decorating, maintenance, repair, and remodeling. Lowe's targets retail do-it-yourself and do-it-for-me customers as well as commercial business clients. We estimate Lowe's captures a double-digit share of the domestic home improvement market, based on U.S. Census estimates for market size.

1000 Lowe's Boulevard
Mooresville, NC, 28117
T +1 704 758-1000
Sector Consumer Cyclical
Industry Home Improvement Retail
Most Recent Earnings Oct 31, 2021
Fiscal Year End Jan 28, 2022
Stock Type Cyclical
Employees 340,000