Yahoo Finance Earnings Release: Here's Why Analysts Cut Their Lowe's Companies, Inc. (NYSE:LOW) Price Target To US$123
It's been a pretty great week for Lowe's Companies, Inc. (NYSE:LOW) shareholders, with its shares surging 20% to US$83.72 in the week since its latest annual results. Results were roughly in line with estimates, with revenues of US$72b and statutory earnings per share of US$5.49. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
See our latest analysis for Lowe's Companies
Following last week's earnings report, Lowe's Companies's 26 analysts are forecasting 2021 revenues to be US$73.4b, approximately in line with the last 12 months. Statutory earnings per share are predicted to grow 18% to US$6.46. Before this earnings report, the analysts had been forecasting revenues of US$74.1b and earnings per share (EPS) of US$6.56 in 2021. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
The consensus price target fell 5.9% to US$123, suggesting that the analysts might have been a bit enthusiastic in their previous valuation - or they were expecting the company to provide stronger guidance in the annual results. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Lowe's Companies analyst has a price target of US$165 per share, while the most pessimistic values it at US$85.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that Lowe's Companies's revenue growth will slow down substantially, with revenues next year expected to grow 1.7%, compared to a historical growth rate of 5.5% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 4.7% next year. Factoring in the forecast slowdown in growth, it seems obvious that Lowe's Companies is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Lowe's Companies's revenues are expected to perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Lowe's Companies's future valuation.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Lowe's Companies going out to 2025, and you can see them free on our platform here.
Plus, you should also learn about the 2 warning signs we've spotted with Lowe's Companies .
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