When you grow accustomed to hearing bad news, it really makes a strong impression when you hear good news. Retail industry investors have heard a lot of bad news in recent weeks. Home improvement retailer Lowe's (LOW 74.37), however, shared only good news this morning when it released its fourth quarter report. Having done so, it made quite an impression that has its stock up 8% in pre-market action.
Lowe's of course has been relatively immune to the traffic difficulties and online competition faced by so many mall-based retailers. That's because Lowe's is not a mall-based retailer and also because its specialty lies in a sweet spot of retail spending strength these days: home improvement. The same can be said for competitor Home Depot (HD 144.91).
Lowe's for its part delivered strongly in the fourth quarter, exceeding analysts' average expectations in many important respects. Its sales increased 19.2% to $15.8 billion; its same-store sales jumped 5.1%; and its adjusted diluted earnings per share surged 45.8% to $0.86, bolstered by the expense leverage it gained from the strong increase in sales.
The home improvement retailer's outlook was reassuring as well.
For fiscal 2017, Lowe's is forecasting total sales to increase approximately 5%, comparable sales to increase approximately 3.5%, and diluted earnings per share to rise 16% to approximately $4.64.
The sales and earnings guidance for fiscal 2017 is above analysts' average expectations.
Unlike many other retailers, Lowe's has sounded an optimistic note about its positioning, saying it expects to benefit from a favorable macroeconomic backdrop for home improvement. That rings true, too, based on the understanding that there is a very limited supply of existing homes for sale, which points to a persistent need/desire among current homeowners to repair and improve their properties.
Entering today's trade, shares of LOW have risen 4.6% since the end of 2016 and 7.7% over the last 52 weeks. They have trailed HD shares, which are up 8.1% year-to-date and 15.3% over the last 52 weeks. That gap will close noticeably today, however, since Lowe's and its stock are on the market's high road after the impressive fourth quarter report and outlook.