Lowe's stock rises as the company reports better-than-expected earnings after Home Depot's mixed quarter

Lowe's (LOW) reported Q1 earnings with revenue of $20.93 billion (matching estimates), adjusted EPS of $2.92 (beating estimates of $2.88), and a same-store sales decline of 1.7% (better than the expected 2.04% drop), driving the stock up nearly 3% premarket. Despite overcoming weather-related headwinds and citing growth in Pro and online sales, Lowe's faces challenges from tariff uncertainty, sourcing 20% of its sales from China, while reiterating its FY25 guidance with total sales projected between $83.5 billion and $84.5 billion.

Analysis

Lowe's (LOW) demonstrated resilience in its first-quarter performance, with revenue of $20.93 billion matching Wall Street estimates and adjusted earnings per share of $2.92 surpassing the expected $2.88, despite both metrics declining 2% and 4.6% year-over-year, respectively. The reported 1.7% decline in same-store sales was better than the anticipated 2.04% drop, a positive signal attributed to mid-single-digit growth in Pro and online sales offsetting unfavorable weather and persistent housing market headwinds. This performance, which led to a nearly 3% premarket stock increase, comes after a period of post-pandemic struggles and a year-to-date stock decline prior to the report. Lowe's reiterated its fiscal year 2025 guidance, projecting total sales between $83.5 billion and $84.5 billion and same-store sales to be flat to up 1%, indicating continued caution. A key concern is the evolving tariff landscape; with 20% of its sales sourced from China and a significant DIY customer base, Lowe's may face greater challenges in mitigating tariff impacts compared to competitor Home Depot, which benefits from a larger professional business segment and has stated it will not raise prices due to tariffs. This tariff uncertainty, despite recent temporary reductions, remains a significant risk factor highlighted by analysts and acknowledged implicitly by the company's focus on overcoming 'near-term uncertainty'.

Key Decisions for Investors

• Investors should acknowledge Lowe's ability to exceed subdued Q1 earnings and same-store sales expectations amidst difficult market conditions, but remain cautious due to the year-over-year declines in key financial metrics and modest forward guidance.
• Careful monitoring of ongoing tariff negotiations and their potential impact on Lowe's margins and consumer pricing is essential, especially considering its 20% product sourcing from China and relatively higher exposure to the DIY segment.
• Consider the company's strategic investments in technology and store environments, alongside growth in Pro and online channels, as key drivers for navigating market headwinds; however, the reiterated guidance for flat to 1% same-store sales growth suggests a slow recovery trajectory.