Lowe's rallies after boosting guidance, unveiling a major acquisition

Althom

Lowe's Companies (NYSE:LOW [https://seekingalpha.com/symbol/LOW]) gained in premarket action on Wednesday after boosting its full-year acquisition and announcing a major acquisition.

For the second quarter, the North Carolina-based specialty retailer reported comparable sales increased by 1.1% to miss the consensus estimate of +1.3%. Total revenue was up 1.6% during the quarter to $23.96 billion.

"This quarter, the company delivered positive comp sales driven by solid performance in both Pro and DIY. Despite challenging weather early in the quarter, our teams drove both sales growth and improved profitability," noted CEO Marvin Ellison. "In June, we closed on the acquisition of ADG, which strengthens our ability to capture a greater portion of Pro planned spend and expands our reach into the new home construction market," he added.

The company's gross margin rate improved by 30 basis points to 33.8% of sales. Cost of sales was 66.2% of total sales, in comparison to 66.5% a year ago. Operating income was 14.5% of sales, vs. 14.6 a year ago. Non-GAAP EPS was reported at $4.33 vs. $4.24 consensus and $4.10 a year ago.

During the quarter that ended on August 1, Lowe's (NYSE:LOW [https://seekingalpha.com/symbol/LOW]) invested $1.3 billion for the acquisition of ADG and paid out $645 million in dividends.

Lowe's (LOW [https://seekingalpha.com/symbol/LOW]) said it expects total sales of approximately $84.5 billion to $85.5 billion ($85.0 billion midpoint) for the full year vs. $84.4 billion consensus, comparable sales to be flat to +1.0% compared to a year ago, and adjusted EPS of $12.20 to $12.45 (midpoint $12.325) vs. $12.22 consensus.

Lowe's Companies (LOW [https://seekingalpha.com/symbol/LOW]) also announced the acquisition of interior building products distributor Foundation Building Materials for around $8.8 billion in cash. Foundation Building Materials is a major North American distributor specializing in interior building products. The company's core offerings include drywall, metal framing, ceiling systems, acoustical ceiling tiles, commercial doors, lath, plaster, insulation, fiberglass reinforced panels (FRP), stucco, and exterior insulation finish systems. Foundation Building Materials also supplies a wide variety of construction tools, fasteners, and accessories tailored for both commercial construction and residential building trades.

Shares of Lowe's (LOW [https://seekingalpha.com/symbol/LOW]) jumped 4.5% in premarket trading. Home Depot (HD [https://seekingalpha.com/symbol/HD]) edged 0.3% higher.

MORE ON LOWE'S

* Lowe's Stock: Dividend Doesn't Lie [https://seekingalpha.com/article/4805364-lowes-stock-dividend-doesnt-lie]
* Lowe's: Execution On Pro Strategy Key To Re-Rating [https://seekingalpha.com/article/4802577-lowes-execution-on-pro-strategy-key-to-re-rating]
* Lowe's: Potential Tailwinds And Taking Initiative [https://seekingalpha.com/article/4797735-lowes-potential-tailwinds-and-taking-initiative]
* Lowe's to acquire Foundation Building Materials for $8.8B [https://seekingalpha.com/news/4487312-lowes-to-acquire-foundation-building-materials-for-88b]
* Lowe's Non-GAAP EPS of $4.33 beats by $0.09, revenue of $23.96B in-line, raises FY revenue guidance [https://seekingalpha.com/news/4487311-lowes-non-gaap-eps-of-433-beats-by-009-revenue-of-2396b-in-line-raises-fy-revenue-guidance]