JP Morgan analyst Christopher Horvers maintained an Overweight rating for Lowe's Companies, Inc. (NYSE: LOW) with a price forecast of $300.
Yesterday, the company highlighted its near-term and long-term financial targets at its 2024 Analyst and Investor Conference.
Lowe's reaffirmed its outlook, projecting total sales between $83 billion and $83.5 billion (consensus estimate: $83.34 billion).
The company expects comparable sales to decline by 3.0% to 3.5% and adjusted EPS of $11.80 - $11.90 (consensus estimate: $11.89).
Lowe's plans to unveil its next phase of Perpetual Productivity Improvement (PPI) initiatives, projected to deliver approximately $1 billion in annual cost savings.
The analyst writes that Lowe's Analyst Day marked a subtle pivot, signaling that the infrastructure built since CEO Marvin Ellison's 2018 arrival is now in place.
The analyst says they continue to favor LOW and write that with the shift to positive comps after three years of pull forward spending and housing headwinds, they believe a moderate 1% comp is reasonable.
The analyst views the 10 basis points of operating margin expansion per comp point and the $1 billion stock repurchase assumption as conservative.
Hoovers adds that Lowe's is advancing self-help initiatives to boost top-line growth and margins, reducing the performance gap with Home Depot.
The industry's duopoly and resistance to Amazon, along with a strong housing-driven long-term outlook, justify its premium valuation, adds the analyst.
Additionally, the recent decline in long-term rates is expected to boost demand, especially as existing home sales remain at 40-year lows, with potential upside from a Fed rate cut, per the analyst.
As the housing market improves, Horvers expects the company to further re-rate, especially with the 2025 guidance uncertainty cleared.
Investors can gain exposure to the stock via IShares U.S. Home Construction ETF (NYSE: ITB) and VanEck Retail ETF (NYSE: RTH).
Price Action: LOW shares are down 1.41% at $264.11 at the last check Thursday.