Why Lowe's Shares Got Hammered
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What: Shares of home improvement chain Lowe's (NYS: LOW) dropped more than 10% after its same-store sales and guidance disappointed Wall Street.
So what: The company's first-quarter results managed to top estimates, but paltry same-store sales growth of just 2.6%, coupled with management's full-year profit warning, is reigniting concerns over its growth prospects going forward. In fact, Lowe's cautious outlook comes just days after larger rival Home Depot (NYS: HD) missed Wall Street's quarterly sales estimates, suggesting that the housing market isn't recovering as quickly as investors think.
Now what: Based on the slowing demand for seasonal products of late, management now sees 2012 EPS of $1.73-$1.83, down from its prior view of $1.75-$1.85. "We continue to maintain a cautious view of the housing and macro demand environment, and are focused on what we can control," Chairman and CEO Robert Niblock said. "We are building on our core strengths and strategically investing in ways that will better position Lowe's for success." More important, with the stock now off 20% from its 52-week high and trading at a forward P/E of 11, buying into that optimism doesn't come at a high price.
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At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended writing covered calls on Lowe's and Home Depot. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.
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