Lowe's (LOW) Stock Forecast & Price Target

Lowe's Companies has demonstrated an encouraging financial performance with total sales rising by 3.2% to $20.8 billion, accompanied by a modest increase in comparable sales of 0.4%. The gross margins improved by 50 basis points year-over-year to 34.2%, primarily due to enhanced inventory management and reduced credit losses, indicating effective operational strategies. Additionally, the company's strategic expansion into the professional customer segment and the launch of a home improvement-focused marketplace could provide significant growth opportunities while bolstering its market share in the domestic home improvement sector.

Lowe's Companies is experiencing a decline in operating margins, which is expected to contract by 20 basis points in 2025 and an additional 30 basis points in 2026, largely due to the integration of lower-margin acquisitions like FBM. Furthermore, potential slow or negative sales growth, driven by external factors such as higher interest rates and changing consumer spending behavior, poses a significant risk to the company's margin expansion efforts. Additionally, the correlation between retail sales and employment trends suggests that decreasing employment could further diminish sales, necessitating a downward adjustment of earnings per share estimates for 2025 and 2026.