Lowe's Companies, Inc. (Lowe's (LOW)) kicked off its fiscal year with a solid quarter, beating Wall Street's earnings and revenue estimates. But if you looked at the stock price Wednesday morning, you wouldn't know it. Shares dipped about 1.2% in premarket trading, a reminder that even good news can get overshadowed by the bigger picture.
The home improvement retailer reported first-quarter adjusted earnings per share of $3.03, topping the $2.97 analysts were looking for. Revenue came in at $23.1 billion, just above the $22.98 billion consensus. That's the kind of beat that usually gets a high-five, but investors are focused on the housing market, which remains stuck in a rut of high interest rates and sluggish activity.
CEO Marvin Ellison tried to strike a balanced tone. "Strong spring execution and continued momentum in Pro, Appliances, Online, and Home Services supported a solid start to the year as we delivered our fourth consecutive quarter of positive comp sales," he said. Then came the but: "In spite of a challenging housing macro, we remain focused on advancing our Total Home strategy."
That "challenging housing macro" is the key. With mortgage rates still elevated and home sales tepid, big-ticket renovation projects aren't flying off the shelves the way they were a few years ago. Lowe's is leaning into what's working: spring DIY projects, online orders (up 15.5%), and its Pro contractor business. Appliances and home services also showed strength.
But margins are feeling the squeeze. Gross margin slipped to 32.68% from 33.38% a year ago, and operating margin fell to 11.07% from 11.92%. Some of that is tied to acquisition costs: Lowe's recorded $96 million in pre-tax expenses related to its purchases of Foundation Building Materials and Artisan Design Group.
On the cash flow front, Lowe's generated $3.35 billion in operating cash during the quarter. It spent $521 million on capital expenditures, paid $674 million in dividends, and bought back $363 million in stock. Cash on hand dropped to $786 million from $3.05 billion a year earlier, while long-term debt rose to $36.75 billion from $30.54 billion — partly reflecting those acquisitions.
As of May 1, Lowe's operated 1,759 stores, covering 196 million square feet of retail space.
Looking ahead, Lowe's affirmed its fiscal 2026 sales forecast of $92 billion to $94 billion, right in line with the $93.25 billion analysts expect. Comparable sales are expected to range from flat to up 2%. But the earnings guidance is a bit more complicated. On a GAAP basis, Lowe's expects EPS of $11.75 to $12.25, below the $12.44 consensus. On an adjusted basis, the outlook is $12.25 to $12.75, which brackets the $12.60 estimate. The difference comes from an expected $0.50 after-tax hit from acquisition-related intangible amortization.
The company also flagged a laundry list of risks: inflation, tariffs, trade policy changes, housing market conditions, labor disruptions, and broader macroeconomic pressures. In other words, the same headwinds that have been keeping everyone up at night.
For now, Lowe's is executing well in a tough environment. But until the housing market catches a break, investors may stay cautious.
