LOW - Embedded Expectations Analysis - 2019 04 16
Lowe's Companies, Inc. (LOW:USA) currently trades above historical averages relative to UAFRS-based (Uniform) Earnings, with a 26.7x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management has concerns about their ability to improve underperforming categories, manage distribution and store inventory, and successfully reduce SG&A leverage.Specifically, they may be concerned about their ability to improve underperforming categories, maintain Pro service lines performance, and limit inconsistency within segments. Moreover, they may be downplaying concerns about their ability to stock stores shelves, navigate sales seasonality, and position the firm for long-term success. Also, management may be concerned about comp performance and vendor relationships, as well as their ability to reduce SG&A leverage, liquidate nonproductive inventory, and manage distribution from their fulfillment center. Finally, they may be exaggerating their ability to drive store payroll leverage, and may be concerned about weakness in the Canadian housing market and their job-lot quantity investments.
Lowe's Companies is a home improvement retailer. The company provides home improvement products in lumber and building materials, appliances, seasonal and outdoor living, tools and hardware, fashion fixtures, rough plumbing and electrical, paint, millwork, lawn and garden, flooring, and kitchens categories. The company provides installation services through independent contractors in product categories, including appliances, flooring, kitchens, lumber and building materials, and millwork. The company also provides extended protection plans for various products within the appliances, kitchens, fashion fixtures, millwork, rough plumbing and electrical, seasonal and outdoor living, and tools and hardware categories.
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- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
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