It is true that there are times when words can say it all.
Robert L. Tillman, Lowe's
Lowe's, the second-leading home improvement retailer behind Home Depot
The company's third-quarter earnings of $0.66 per share beat the analysts' consensus estimate of $0.65 per share and were 8% ahead of last year's $0.56 per share. Total sales for the quarter increased 16% and same-store sales (stores open at least two years) were up 5.2%. The growth in same-store sales was especially impressive given the company's 12.2% advance last year; Lowe's pronounced that this sales performance was "the best two-year performance in nearly a decade."
Lowe's strong third-quarter performance was paced by the sales growth combined with its effective cost controls, which produced more than a 200-basis-point increase in operating margin. Looking ahead, the company expects sales to increase 16% to 17% in the fourth quarter (4% to 5% growth for same-store sales). Lowe's also expects an 18% increase (6% to 7% same-store sales gain) for the full-year 2004. Earnings of $0.58 to $0.60 per share for the fourth quarter and $2.69 to $2.71 per share for 2004 are in line with current estimates.
The company expects to add 56 new stores in the fourth quarter (a 14% growth in square footage) and should end the year having opened a total of 140 new stores. Lowe's currently operates 1,031 stores in 45 states. Front-runner Home Depot operates 1,826 stores in 50 states, but it had a head start.
The Lowe's shares, which are trading at only 18 times next year's earnings estimate of $3.34 per share, appear to be relatively attractive vs. its projected 24% earnings growth rate. Throw in a 0.27% dividend yield and Lowe's can be a good fix for just about any investor.
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Fool contributor Phil Wohl spent more than 12 years on Wall Street and owns shares of Lowe's.