Lowe’s Companies, Inc (LOW): Flywheel Effect?—Pro-Growth Momentum and AI Investments Setting the Stage!

Lowe’s Q2 2024 results reflected the effects of weakened consumer spending, with same-store sales down 5.1% and a 5.5% decline in total revenue. However, professional sales rose in the mid-single digits, and online sales grew 2.9%, highlighting pockets of resilience. However, Pro sales and online growth provided resilience, showcasing the strength of Lowe’s Total Home strategy and omnichannel fulfillment. Despite sales pressure, the company maintained solid operating performance through disciplined expense management and its Perpetual Productivity Improvement (PPI) initiatives. While macroeconomic uncertainty persists, long-term growth drivers, including home price appreciation and aging housing stock, remain favorable. Lowe’s continues to invest in technology and innovation while maintaining operational discipline, positioning itself for market share growth once the home improvement market recovers. Despite cost pressures, Lowe’s delivered an adjusted operating margin of 14.4% though down 115 basis points year over year. Lowe’s revised its 2024 outlook, lowering its total sales projection to $83 billion and adjusting its comparable sales decline range to 3.5%-4%. Lowe’s operating margin for the year is expected to hit 12.4%, and EPS is projected towards a 10% decline in line with the guidance. Looking ahead, while near-term sales challenges persist, Lowe’s profitability is expected to improve as economic conditions stabilize. The firm’s long-term growth outlook remains intact, supported by solid fundamentals, including a focus on operational efficiency and cost leverage. While Lowe’s strategic initiatives and operational improvements set the stage for future growth, shares appear fully valued at 18.65 times our updated 2025 EPS estimate. We strongly believe with momentum in their Pro and digital strategies, they are positioned to fully capture market share gains once consumer confidence in discretionary DIY purchases rebounds.Given the balanced outlook between near-term challenges and long-term potential, we conclude......