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LOW – Market expectations are for Uniform ROA to remain stable, but management may be concerned about inflation, margins, and the home improvement industry

July 6, 2021

  • Lowe’s Companies, Inc. (LOW:USA) currently trades around corporate averages relative to UAFRS-based (Uniform) earnings, with a 22.8x Uniform P/E. At these levels, the market has expectations for profitability to remain stable, but management may be concerned about inflationary headwinds, margin targets, and the home improvement industry outlook

  • Specifically, management may have concerns about inflationary headwinds, potential spending shifts away from home, and the sustainability of tailwinds for the home improvement industry. In addition, they may lack confidence in their ability to sustain Lowes.com revenue growth, maintain their inventory levels, and achieve their operating margin targets. Also, they may have concerns about the sustainability of stimulus check benefits as well as the demand for repairs and remodeling. Furthermore, they may be exaggerating the potential of their STAINMASTER brand acquisition and their capacity to accommodate demand surges