RBC Capital Markets analyst Steven Shemesh initiated coverage on Lowe's Companies, Inc.
The analyst says while Lowe's under-penetration in its Pro business presents a share gain/margin opportunity in the long term, it will likely result in underperformance vs. peers in the near term as the consumer backdrop worsens.
Notably, Shemesh expects Lowes' sales mix (currently 75% accounts for DIY/DIFM) to result in disproportionate softness in the near term as consumers pull back on deferrable spending.
Although the company's Pro business is not immune to macro pressure, the analyst sees the market as more resilient owing to a safety net with maintenance/repair projects.
Overall, the analyst has a slightly more bearish view on home improvement than the consensus due to higher interest rates, continued inflation, and shifting consumer spending towards services.
Consequently, the analyst estimates comp sales and EPS of -3.5% (cons. -3.3%) and $13.29 (cons. $13.34) in FY23 and -0.3% (vs. street view +1.0%) and $13.84 (vs. $14.26 street view) in FY24.
Price Action: LOW shares are trading lower by 0.25% at $193.73 on the last check Tuesday.