Lowe’s (LOW) stock reacted positively to SunTrust Robinson’s upgrade on September 28. On the day, the company’s stock price rose to a high of $117.70, a new 52-week high, before closing at $114.82, which represents a rise of 0.3% from its previous day’s closing price.
YTD (year-to-date), Lowe’s stock price has increased by 23.5%. The company’s stock price was driven by optimism surrounding Marvin Ellison’s turnaround initiatives, and favorable macroeconomic factors such as rising home prices, a lower unemployment rate, and rising labor wages. Ellison, who joined Lowe’s as its CEO in July, has simplified the company’s organizational structure and made some important leadership appointments, which appear to have increased investors’ confidence.
During the same period, peers Home Depot (HD), Williams-Sonoma (WSM), and Bed Bath & Beyond (BBBY) have returned 9.3%, 27.1%, and -31.8%, respectively. Meanwhile, the stock price of the broader comparative index, the SPDR S&P Homebuilders ETF (XHB), which invests ~30% of its holdings in home improvement and furnishing companies, has fallen 13.1%.
For the next four quarters, analysts expect Lowe’s to post revenue of $72.79 billion, which represents growth of 3.2% from $70.51 billion. During the same period, its EPS (earnings per share) are expected to rise by 7.3% to $5.42.
As of September 28, Lowe’s was trading at a forward PE (price-to-earnings) multiple of 20.1x compared to 18.0x at the beginning of 2018. The surge in Lowe’s stock price has increased its valuation multiple. On the same day, peers Home Depot, Williams-Sonoma, and Bed Bath & Beyond were trading at forward PE multiples of 20.7x, 14.8x, and 7.1x, respectively.
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