Lowe’s Earnings: Margins SUFFER for Five Quarters Straight, Profit Drops

S&P 500 (NYSE:SPY) component Lowe’s Companies Inc. (NYSE:LOW) reported its results for the second quarter. Lowe’s Companies is a home improvement retailer offering products to homeowners, renters, and commercial business customers.

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Lowe’s Companies Inc. Earnings Cheat Sheet

Results: Net income for Lowe’s Companies Inc. fell to $747 million (64 cents per share) vs. $830 million (64 cents per share) a year earlier. This is a decline of 10% from the year-earlier quarter.

Revenue: Fell 2% to $14.25 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: Lowe’s Companies Inc. reported adjusted net income of 65 cents per share. By that measure, the company fell short of mean estimate of 71 cents per share. It beat the average revenue estimate of $12.98 billion.

Quoting Management: “Our results fell short of our overall expectations,” commented Robert A. Niblock, Lowe’s chairman, president and CEO. “However, I have confidence in our strategy and in our employees, and while we recognize the significant magnitude of change that we’ve asked the organization to absorb as we transform our business, we fully understand that we must improve our level of execution.”

Key Stats:

Last quarter was the fifth in a row that the company saw shrinking gross margins, as they fell 0.6 percentage point from the year-earlier quarter to 33.9%. Over that time, margins have contracted on average 0.8 percentage point per quarter on a year-over-year basis.

A year-over-year revenue decrease last quarter breaks a four-quarter streak of revenue increases. The best quarter in that span was the fourth quarter of the last fiscal year, which saw revenue rise 11%.

The company fell short of forecasts after beating estimates in the previous two quarters. In the first quarter, it topped the mark by one cent, and in the fourth quarter of the last fiscal year, it was ahead by 6 cents.

Last quarter’s profit decrease ends a two-quarter streak of year-over-year profit increases. Net income rose 14.3% in the first quarter and 13% in the fourth quarter of the last fiscal year.

Looking Forward: The outlook for the company’s results in the upcoming quarter is unfavorable. The average estimate for the third quarter is 40 cents per share, down from 41 cents ninety days ago. The average estimate for the fiscal year is now $1.81 per share, down from $1.87 sixty days ago.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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