Market watchers are waiting for Lowe’s Companies, Inc. (LOW Quick QuoteLOW – Free Report) third-quarter fiscal 2023 earnings, scheduled to be reported on Nov 21 after the closing bell. This time, too, investors’ focus will be on comparable store sales, the key metric to gauge the company’s performance.
Insights Into Comparable Sales
Before delving into the third quarter of fiscal 2023, let’s revisit the second quarter.
In the second quarter of fiscal 2023, Lowe’s comparable sales performance displayed a diverse picture. The metric fell 1.6% in the quarter under review, including a 1.9% drop in comparable customer transactions, somewhat offset by a comparable average ticket rise of 0.3%. The metric deteriorated due to lumber commodity deflation and persistent macroeconomic pressures hurting Do-It-Yourself (DIY) consumer discretionary spending.
The company witnessed positive comparable sales growth with its Pro customers from the success of its expanded national and private brands, Pro Rewards and upgraded online capabilities. It saw positive online comparable sales in the fiscal second quarter on improved omnichannel experience.
As we turn our attention to the third quarter, it’s important to note that the company is battling a tough operating backdrop, including inflationary pressures and foreign currency headwinds. Stronger-than-anticipated pullback in home-improvement spending, lumber deflation and weaker-than-expected DIY discretionary sales might have acted as deterrents.
On its last earnings call, management highlighted that it expects to witness the toughest comparison of the year with respect to the fiscal third quarter, as it saw plus 3% comparable sales in the United States last year. We expect a comparable sales decline of 4% in the fiscal third quarter. We anticipate an average ticket of $102.4 for the fiscal third quarter, suggesting a drop of 2.1% year over year. Total customer transactions are projected at 205.6 million, indicating a decline of 8.6%.
How Are Estimates Shaping Up?
The Zacks Consensus Estimate for quarterly revenues is pegged at $20,974 million, suggesting a 10.7% decline from the year-ago quarter’s reported figure. The consensus mark for earnings per share (EPS) has dropped by a penny to $3.05 in the past seven days. The figure suggests a drop of 6.7% from the year-ago period’s levels.
Lowe’s Companies, Inc. Price and EPS Surprise
Our proven model does not conclusively predict an earnings beat for Lowe’s this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, that’s not the case here.
Lowe’s has a Zacks Rank #4 (Sell) and Earnings ESP of -0.32%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks With a Favorable Combination
Here are a few companies, which according to our model, have the right combination to beat on earnings this reporting cycle:
Build-A-Bear Workshop (BBW Quick QuoteBBW – Free Report) currently has an Earnings ESP of +0.66% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for third-quarter fiscal 2023 EPS is pegged at 51 cents, flat year over year.
Build-A-Bear Workshop’s top line is expected to increase year over year. The consensus estimate for quarterly revenues is pegged at $107.6 million, which indicates an increase of 3% from the figure reported in the prior-year quarter. BBW has a trailing four-quarter earnings surprise of 21.6% on average.
Costco (COST Quick QuoteCOST – Free Report) currently has an Earnings ESP of +4.26% and a Zacks Rank of 2. COST is likely to register a bottom-line increase when it reports first-quarter fiscal 2024 numbers. The Zacks Consensus Estimate for quarterly EPS of $3.43 suggests an increase of 10.7% from the year-ago fiscal quarter’s reported number.
Costco’s top line is expected to improve from the prior-year fiscal quarter’s reported number. The consensus estimate for quarterly revenues is pegged at $57.7 billion, suggesting growth of 6% from the prior-year fiscal quarter’s reported figure. COST has a trailing four-quarter earnings surprise of 2.1% on average.
NIKE (NKE Quick QuoteNKE – Free Report) currently has an Earnings ESP of +0.45% and a Zacks Rank of 3. The company is likely to register top- and bottom-line growth when it reports second-quarter fiscal 2024 numbers. The Zacks Consensus Estimate for NKE’s quarterly EPS of 85 cents remains flat year over year.
NIKE has a trailing four-quarter earnings surprise of 27.1% on average. The consensus estimate for NKE’s quarterly revenues is pegged at $13.4 billion, indicating a rise of 0.7% from the figure reported in the prior-year quarter.