Will Lowe's (LOW) Retain Its Earnings Beat Streak in Q3?

Lowe's Companies, Inc. LOW is likely to register top and bottom-line growth when it reports third-quarter fiscal 2020 numbers on Nov 18, before the opening bell. The Zacks Consensus Estimate for revenues is pegged at $20,709 million, which indicates an increase of 19.1% from the year-ago quarter.

The Zacks Consensus Estimate for quarterly earnings went up by 5 cents in the past 30 days and is currently pegged at $1.94 per share. The consensus estimate suggests a rise of 37.6% from earnings of $1.41 reported in the year-ago quarter. Notably, the company has a trailing four-quarter earnings surprise of 17.2%, on average.

Aspects Likely to Show on Q3 Performance

Lowe's top line during the third quarter is likely to have gained from consumers’ growing inclination toward home remodeling and maintenance activities. With increased stay-at-home directives amid the coronavirus pandemic, home renovation and refurbishing projects are being widely undertaken. In fact, such trends are likely to have favored the company’s U.S. home-improvement business during the third quarter. Also, higher demand from DIY (do-it-yourself) and pro customers across channels is likely to have remained an upside. An improving housing market scenario has also been acting as a tailwind.

Additionally, we expect Lowe's fiscal third-quarter performance to have benefited from its solid retail fundamental strategy, gains from investments in technology and impressive merchandising strategies. Speaking of technology, we note that Lowe’s boasts a strong digital presence. In this context, the company has been gaining from the migration of Lowes.com to the cloud as well as the rollout of curbside pickup. Such investments have been helping in meeting elevated demand from DIY and pro customers. Additionally, the company’s efforts to bolster pickup services, such as investments in self-service lockers, are encouraging. Such prudent measures are likely to have boosted the company’s online sales during the quarter under review.

The aforementioned factors raise optimism regarding third-quarter results. However, we cannot ignore the concerns surrounding rising expenses that may have built some pressure on the company’s performance. We note that the company has been incurring higher expenses with respect to additional safety and cleansing measures on account of the pandemic, expansion of supply-chain infrastructure as well as increased promotional spending.

Lowes Companies, Inc. Price, Consensus and EPS Surprise

Lowes Companies, Inc. price-consensus-eps-surprise-chart | Lowes Companies, Inc. Quote

What the Zacks Model Unveils

Our proven model predicts an earnings beat for Lowe’s this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Lowe’s carries a Zacks Rank #3 and an Earnings ESP of +8.85%.

Other Stocks Poised to Beat Earnings Estimates

Here are some more companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat.

Beacon Roofing Supply, Inc. BECN has an Earnings ESP of +3.38% and a Zacks Rank #2, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Home Depot, Inc. HD has an Earnings ESP of +5.98% and a Zacks Rank #3.

Fastenal Company FAST has an Earnings ESP of +1.33% and a Zacks Rank #3.

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