BUY HOLD SELL A+ A A- B+ B B- C+ C C- D+ D D- E+ E E- F Annual Dividend Rate BUSINESS DESCRIPTION Lowe's Companies, Inc. operates as a home improvement company in the United States, Canada, and Mexico. It offers a line of products for maintenance, repair, remodeling, and decorating. STOCK PERFORMANCE (%) 3 Mo. 1 Yr. 3 Yr (Ann) Price Change 7.65 9.46 8.84 GROWTH (%) Last Qtr 12 Mo. 3 Yr CAGR Revenues 6.55 10.30 7.58 Net Income 130.68 45.79 11.66 EPS 144.18 52.74 18.12 RETURN ON EQUITY (%) Ind Avg S&P 500 Q3 2017 61.92 177.89 13.41 Q3 2016 36.96 65.10 11.79 Q3 2015 35.62 47.08 12.91 P/E COMPARISON BUY Sector: Consumer Goods & Svcs Sub-Industry: Home Improvement Retail Source: S&P BUY RATING SINCE 01/10/2012 TARGET PRICE $96.59 Weekly Price: (US$) SMA (50) SMA (100) 1 Year 2 Years Rating History BUY Volume in Millions 2016 2017 COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History TARGET PRICE $96.59 100 95 90 85 80 75 70 65 60 60 40 20 0 20.06 EPS ANALYSIS¹ ($) 23.64 Ind Avg 25.35 S&P 500 RECOMMENDATION We rate () a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, revenue growth, reasonable valuation levels and increase in stock price during the past year. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated. HIGHLIGHTS reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, increased its bottom line by earning $3.46 versus $2.71 in the prior year. This year, the market expects an improvement in earnings ($4.51 versus $3.46). Q1 0.70 Q2 1.20 Q3 0.80 2015 Q4 0.01 Q1 0.98 Q2 1.31 Q3 0.43 2016 NA = not available NM = not meaningful Q4 0.74 Q1 0.70 Q2 1.68 Q3 1.05 2017 1 Compustat fiscal year convention is used for all fundamental data items. The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Specialty Retail industry. The net income increased by 130.7% when compared to the same quarter one year prior, rising from $378.00 million to $872.00 million. 's revenue growth trails the industry average of 26.3%. Since the same quarter one year prior, revenues slightly increased by 6.5%. Growth in the company's revenue appears to have helped boost the earnings per share. Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year. Report Date: PAGE 1
PEER GROUP ANALYSIS REVENUE GROWTH AND EBITDA MARGIN* Revenue Growth (TTM) -8% 12% LL BBBY AN UNFAVORABLE ARCI TTS HD -10% BKS EBITDA Margin (TTM) AEO FAVORABLE AAN 60% Companies with higher EBITDA margins and revenue growth rates are outperforming companies with lower EBITDA margins and revenue growth rates. Companies for this scatter plot have a market capitalization between $6.2 Million and $212.5 Billion. Companies with NA or NM values do not appear. *EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization. REVENUE GROWTH AND EARNINGS YIELD Revenue Growth (TTM) -8% 12% LL TTS HD AEO AAN BBBY AN UNFAVORABLE ANF -10% BKS Earnings Yield (TTM) FAVORABLE ARCI 90% Companies that exhibit both a high earnings yield and high revenue growth are generally more attractive than companies with low revenue growth and low earnings yield. Companies for this scatter plot have revenue growth rates between -7.3% and 10.3%. Companies with NA or NM values do not appear. INDUSTRY ANALYSIS The specialty retail industry includes very well-known home improvement, apparel, automotive, and other narrow-focus stores such as Home Depot (HD), TJX Companies (TJX), Lowe s Companies (), Gap (GPS), Bed Bath & Beyond (BBBY), Ross Stores (ROST), O Reilly Automotive (ORLY), CarMax (KMX), and Build-A-Bear Workshop (BBW). The variety of product focuses targeted by specialty retail companies is very diverse. These include but are not limited to home improvement goods, pharmaceutical & beauty, shoes, electronics, and office supplies. Also included are stores narrowly focused on music, books, wine, games, rentals, vitamins, lumber, sporting goods, toys, jewelry, and fashion apparel for men, women, and teddy bears. Some of the larger specialty retail companies also profit from the extension of credit to their customers with branded credit cards. Companies in this industry are judged based on the metric of same-store sales, a measurement that shows if stores open for more than one year are increasing top line revenue or shrinking. PEER GROUP: Specialty Retail Recent Market Price/ Net Sales Net Income Ticker Company Name Price ($) Cap ($M) Earnings TTM ($M) TTM ($M) 83.63 69,393 20.06 68,909.00 3,556.00 LL LUMBER LIQUIDATORS HLDGS INC 29.94 853 NM 1,013.98-46.31 ARCI APPLIANCE RECYCLING CTR AMER 0.90 6 1.22 100.64 5.02 AN AUTONATION INC 55.38 5,053 13.95 21,331.60 398.60 BKS BARNES & NOBLE INC 6.70 488 31.90 3,766.56 15.98 TTS TILE SHOP HOLDINGS INC 8.65 451 24.03 342.63 18.44 BBBY BED BATH & BEYOND INC 22.57 3,233 5.80 12,167.94 564.67 AEO AMERN EAGLE OUTFITTERS INC 16.74 2,964 18.20 3,664.07 164.83 AAN AARON'S INC 38.43 2,719 20.23 3,294.04 136.61 HD HOME DEPOT INC 182.00 212,530 25.28 99,228.00 8,595.00 ANF ABERCROMBIE & FITCH 17.79 1,212 NM 3,335.90-18.33 The peer group comparison is based on Major Home Improvement Retail companies of comparable size. Report Date: PAGE 2
Annual Dividend Rate COMPANY DESCRIPTION Lowe's Companies, Inc. operates as a home improvement company in the United States, Canada, and Mexico. It offers a line of products for maintenance, repair, remodeling, and decorating. The company provides home improvement products in various categories, such as lumber and building materials, tools and hardware, appliances, fashion fixtures, rough plumbing and electrical, seasonal living, lawn and garden, paint, millwork, flooring, kitchens, outdoor power equipment, and home fashions. It also offers installation services through independent contractors in various product categories; extended protection plans; and in-warranty and out-of-warranty repair services. The company sells its national brand-name merchandise and private branded products to homeowners, renters, and professional customers; and retail customers comprising individual homeowners and renters. As of March 24, 2017, it operated 2,365 home improvement and hardware stores. The company also sells its products through online sites comprising Lowes.com and Lowesforpros.com; and through mobile applications. Lowe's Companies, Inc. was founded in 1946 and is headquartered in Mooresville, North Carolina. 1000 Lowe's Boulevard Mooresville, NC 28117 USA Phone: 704-758-1000 http://www.lowes.com STOCK-AT-A-GLANCE Below is a summary of the major fundamental and technical factors we consider when determining our overall recommendation of shares. It is provided in order to give you a deeper understanding of our rating methodology as well as to paint a more complete picture of a stock's strengths and nesses. It is important to note, however, that these factors only tell part of the story. To gain an even more comprehensive understanding of our stance on the stock, these factors must be assessed in combination with the stock s valuation. Please refer to our Valuation section on page 5 for further information. FACTOR SCORE Growth 4.0 out of 5 stars Measures the growth of both the company's income statement and cash flow. On this factor, has a growth score better than 70% of the stocks we rate. Total Return 4.5 out of 5 stars Measures the historical price movement of the stock. The stock performance of this company has beaten 80% of the companies we cover. Efficiency 5.0 out of 5 stars Measures the strength and historic growth of a company's return on invested capital. The company has generated more income per dollar of capital than 90% of the companies we review. Price volatility 4.0 out of 5 stars Measures the volatility of the company's stock price historically. The stock is less volatile than 70% of the stocks we monitor. Solvency 4.5 out of 5 stars Measures the solvency of the company based on several ratios. The company is more solvent than 80% of the companies we analyze. Income 4.0 out of 5 stars Measures dividend yield and payouts to shareholders. The company's dividend is higher than 70% of the companies we track. THESTREET RATINGS RESEARCH METHODOLOGY TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates. While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenues, financial strength, and company cash flows. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's performance. These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. Report Date: PAGE 3
Consensus EPS Estimates² ($) IBES consensus estimates are provided by Thomson Financial 0.86 Q4 FY18 4.51 E 2018(E) 5.12 E 2019(E) INCOME STATEMENT Net Sales ($mil) 16,770.00 15,739.00 EBITDA ($mil) 1,905.00 1,755.00 EBIT ($mil) 1,547.00 1,371.00 Net Income ($mil) 872.00 378.00 FINANCIAL ANALYSIS 's gross profit margin for the third quarter of its fiscal year 2017 is essentially unchanged when compared to the same period a year ago. The company has grown its sales and net income during the past quarter when compared with the same quarter a year ago, and although its growth in net income has outpaced the industry average, its revenue growth has not. has very liquidity. Currently, the Quick Ratio is 0.06 which clearly shows a lack of ability to cover short-term cash needs. The company's liquidity decreased from the same period a year ago, despite already having very liquidity to begin with. This would indicate deteriorating cash flow. During the same period, stockholders' equity ("net worth") has decreased by 12.98% from the same quarter last year. The key liquidity measurements indicate that the company is in a position in which financial difficulties could develop in the near future. STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. To learn more visit www.thestreetratings.com. BALANCE SHEET Cash & Equiv. ($mil) 828.00 1,083.00 Total Assets ($mil) 36,783.00 35,370.00 Total Debt ($mil) 16,038.00 15,195.00 Equity ($mil) 5,742.00 6,599.00 PROFITABILITY Gross Profit Margin 34.07% 34.35% EBITDA Margin 11.35% 11.15% Operating Margin 9.22% 8.71% Sales Turnover 1.87 1.77 Return on Assets 9.66% 6.89% Return on Equity 61.92% 36.96% DEBT Current Ratio 1.02 1.01 Debt/Capital 0.74 0.70 Interest Expense 164.00 168.00 Interest Coverage 9.43 8.16 SHARE DATA Shares outstanding (mil) 831 873 Div / share 0.41 0.35 EPS 1.05 0.43 Book value / share 6.91 7.56 Institutional Own % NA NA Avg Daily Volume 6,481,503 6,418,791 2 Sum of quarterly figures may not match annual estimates due to use of median consensus estimates. Report Date: PAGE 4
RATINGS HISTORY Our rating for has not changed since 1/10/2012. As of 12/7/2017, the stock was trading at a price of which is 5.6% below its 52-week high of $88.55 and 18.6% above its 52-week low of $70.49. 2 Year Chart BUY: $76.45 2016 $90 $80 $70 MOST RECENT RATINGS CHANGES Date Price Action From To 12/7/15 $76.45 No Change Buy Buy Price reflects the closing price as of the date listed, if available RATINGS DEFINITIONS & DISTRIBUTION OF THESTREET RATINGS (as of 12/7/2017) 45.41% Buy - We believe that this stock has the opportunity to appreciate and produce a total return of more than 10% over the next 12 months. 30.81% Hold - We do not believe this stock offers conclusive evidence to warrant the purchase or sale of shares at this time and that its likelihood of positive total return is roughly in balance with the risk of loss. 23.78% Sell - We believe that this stock is likely to decline by more than 10% over the next 12 months, with the risk involved too great to compensate for any possible returns. TheStreet Ratings 14 Wall Street, 15th Floor New York, NY 10005 www.thestreet.com Research Contact: 212-321-5381 Sales Contact: 866-321-8726 VALUATION BUY. This stock's P/E ratio indicates a discount compared to an average of 23.64 for the Specialty Retail industry and a discount compared to the S&P 500 average of 25.35. To use another comparison, its price-to-book ratio of 12.10 indicates a significant premium versus the S&P 500 average of 3.22 and a significant discount versus the industry average of 37.56. The price-to-sales ratio is well below both the S&P 500 average and the industry average, indicating a discount. Upon assessment of these and other key valuation criteria, proves to trade at a discount to investment alternatives within the industry. Price/Earnings 20.06 Peers 23.64 Discount. A lower P/E ratio than its peers can signify a less expensive stock or lower growth expectations. Price/Projected Earnings 16.33 Peers 21.47 Discount. A lower price-to-projected earnings ratio than its peers can signify a less expensive stock or lower future growth expectations. Price/Book 12.10 Peers 37.56 Discount. A lower price-to-book ratio makes a stock more attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet. is trading at a significant discount to its peers. Price/Sales 1.01 Peers 1.60 Discount. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales. is trading at a significant discount to its industry on this measurement. DISCLAIMER: Price/CashFlow 12.09 Peers 15.12 Discount. The P/CF ratio, a stock s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures. Price to Earnings/Growth 0.67 Peers 2.53 Discount. The PEG ratio is the stock s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples. trades at a significant discount to its peers. Earnings Growth lower higher 52.74 Peers 11.88 Higher. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios. is expected to have an earnings growth rate that significantly exceeds its peers. Sales Growth lower higher 10.30 Peers 5.19 Higher. A sales growth rate that exceeds the industry implies that a company is gaining market share. has a sales growth rate that significantly exceeds its peers. The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided via the COMPUSTAT Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as other third-party data providers. TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a qualified securities professional, before you make any investment. None of the information contained in this report constitutes, or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at http://www.thestreet.com/static/about/terms-of-use.html. Report Date: PAGE 5