4. Lowe’s Companies Inc. (NYSE:LOW)
Number of Hegde Fund Investors: 62
Jim Cramer recently reviewed Lowe’s Companies Inc. (NYSE:LOW) performance, a prominent home improvement retailer. He pointed out that while Lowe’s Companies Inc. (NYSE:LOW)’s recent quarter was slightly weaker than expected, the decline was not significant.
“Let’s start with Lowe’s, the well-known home improvement chain. The quarter was weaker than expected, but not by much. Management explained that there aren’t enough housing transactions happening for them to hit their targets. As CEO Marvin Ellison said, ‘People aren’t moving nearly as often as they typically do because current mortgage rates are so much higher than their existing rates.’ He added, ‘As a consequence, housing turnover is hovering near its lowest level since the mid-1990s, and the preference for spending on services, especially among more affluent consumers, has persisted much longer than expected.’
Lowe’s also discussed weakness in big-ticket items, noting that homeowners are deferring their projects. They mentioned a great deal of uncertainty, particularly around interest rates and inflation. People who locked in lower rates before the Fed started tightening simply don’t want to take out a new mortgage at much higher rates, not to mention home equity loans, which are typically used to pay for these big-ticket items. As a result, Lowe’s cut its guidance.”
Lowe’s Companies Inc. (NYSE:LOW), a leading home improvement chain, had a tough quarter due to weaker-than-expected performance, primarily driven by current housing market conditions. CEO Marvin Ellison pointed out that high mortgage rates are keeping people from moving, resulting in the lowest housing turnover since the mid-1990s. This has led consumers to focus more on services rather than major home projects.
However, Lowe’s Companies Inc. (NYSE:LOW) is adapting to these changing consumer preferences and economic uncertainties. As housing turnover eventually picks up and consumer spending shifts back, Lowe’s Companies Inc. (NYSE:LOW) is well-positioned to recover and potentially exceed expectations. Lowe’s Companies Inc. (NYSE:LOW)’s ability to navigate these challenges and its strategic adjustments suggest a promising outlook for the future.
In Q2 2024, Lowe’s Companies Inc. (NYSE:LOW) achieved revenue of $23.6 billion and an adjusted diluted EPS of $4.10, even though comparable sales fell by 5.1% from the previous year. Despite this decline, Lowe’s Companies Inc. (NYSE:LOW) saw growth in its Pro and online segments, highlighting the success of its strategic efforts. Lowe’s Companies Inc. (NYSE:LOW) has been expanding its delivery options and launching the MyLowe’s Rewards program, setting the stage for future growth.
Furthermore, Lowe’s Companies Inc. (NYSE:LOW) demonstrated strong financial health by generating $2.7 billion in free cash flow and repurchasing 4.4 million shares for $1 billion. With its robust fundamentals, strategic improvements, and focus on high-growth areas, Lowe’s Companies Inc. (NYSE:LOW) is well-positioned to rebound and excel as market conditions improve, making it a promising investment for long-term gains.
Madison Investors Fund stated the following regarding Lowe’s Companies, Inc. (NYSE:LOW) in its Q2 2024 investor letter:
“At home improvement retailer Lowe’s Companies, Inc. (NYSE:LOW), sales continue to be weak. The economic backdrop in housing is particularly interesting at the moment. On one hand, employment levels are healthy and home values remain resilient. On the other hand, housing turnover, which is essentially the number of homes that have been sold relative to the housing stock, is at historically low levels as homeowners are resistant to giving up low mortgage rates on their current home for a higher rate on a new home. Housing turnover is an important business driver for Lowe’s, so the depressed level of activity has weighed on its profits. However, over time we expect it to normalize and Lowe’s performance to improve.”
