Lowe’s (NYSE: LOW) hasn’t missed a quarter, hasn’t cut its dividend, and hasn’t backed off guidance. But the stock is still down 4% over the past 12 months. It trails the S&P 500 by nearly 19 points and hasn’t cleared its 200-day since April.
Earnings are holding. Dividends are growing. Institutional ownership is steady. The market moved on after one weak comp and never looked back.
I’ve tracked LOW through tighter macro cycles and looser ones. This version — stable earnings with no narrative — is where upside usually hides in plain sight.
Action: Accumulate shares under $235 ahead of Q2 earnings on August 20. A clean print paired with steady cash flow could reset LOW into the $260–$270 range.
Why the Market Overcorrected and What Comes Next
Lowe’s got clipped last quarter, not on the earnings line, but on the optics. EPS came in at $2.92 vs. $2.88 expected. Revenue dipped 2% YoY. Cash from operations dropped 20.7%. That last number got the headlines.
The stock fell 1.7% on the release. Since then, it’s trailed both the Retail-Wholesale sector and the S&P, despite positive estimate revisions and stable forward guidance.
From my seat, that kind of mismatch usually signals one thing: the Street is looking backward, not forward.
None of this reflects a broken business. FY25 earnings are still on pace for $12.30, with FY26 set to climb another 9.2% to $13.43.
Lowe’s has topped expectations for four straight quarters, raised its dividend, and still trades at a discount to sector averages on forward P/E and PEG.
The setup heading into Q2 is simple: $4.25 expected EPS on $23.96 billion in revenue. That’s 3.7% earnings growth, even with flat consumer discretionary trends.
If those numbers stick, this can reprice quickly, especially with institutions holding 74% of the float and buybacks still active.
Pro Channel & Loyalty Engagement Could Be the Spark
Lowe’s is scaling higher-value revenue through Pro and DIFM (do-it-for-me) customers, the sticky segment that drives larger baskets and repeat spend.
The LowesForPros platform continues to expand, targeting contractors, property managers, and repair businesses with better inventory access, faster fulfillment, and tailored credit offerings.
That shift matters. These buyers operate on timelines and budgets that move independently of consumer sentiment, making them more resilient in mixed macro cycles.
It’s a move that’s showing traction. While broader revenue softened last quarter, Pro engagement held up. The loyalty flywheel, especially across commercial accounts, remains intact.
The next leg of growth could come from increased monetization of those relationships as spend per Pro account expands.
This is a continuation of a multi-year move away from one-off DIY volatility and toward steady-margin, recurring customer cohorts.
It’s the kind of shift that rarely shows up in quarterly comps – but when it does, it usually drives multiple expansion.
If August’s earnings show any uptick in commercial activity or improved Pro penetration, expect a fast narrative reset.
Buybacks, Dividend Hikes, and Institutional Anchors
Lowe’s has kept its capital return machine running. While headlines fixate on short-term comps, the company has continued to hand cash back to shareholders and tighten float.
The dividend was raised to $1.20 per share this quarter, bringing the annual yield to 2.12%. The payout ratio remains conservative at 39.77%, with room for additional hikes if operating margins stabilize.
Pair that with ongoing buybacks, and Lowe’s quietly reinforces a valuation floor.
Institutions haven’t walked away either. Roughly 74% of the float remains in fund hands, and net additions from managers like Northern Trust, Carnegie Investment Counsel, and Avantax point to continued long-hold positioning.
No panic, no rotation, steady hands holding through the noise.
What’s working under the surface:
Dividend up 4.3% this quarter, now $4.80 annually
Institutional ownership: 74.06%, with Q1 net inflows
Insider selling remains low (EVP sold <0.3% of stake in June)
Active share buybacks continue alongside an elevated cash balance
This is the profile I want in a late-cycle compounder: stable payout, strong ownership base, and room to flex buybacks if sentiment turns.
This is a company that’s not waiting for permission to reward shareholders. It’s already doing it. What’s missing is recognition, and that tends to catch up fast once results hold steady.
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Sector Tailwinds Are Quietly Turning
Housing activity remains choppy, but renovation cycles are beginning to stabilize.
Homeowners staying put are driving demand for upgrades, repairs, and remodels, the core categories where Lowe’s captures margin.
This isn't a volume boom, but the mix shift favors Pro-heavy retailers. Aging housing stock, longer ownership tenure, and deferred maintenance all push spend into Lowe’s category lanes.
Even without a full housing rebound, steady activity in non-discretionary repairs supports earnings consistency.
At the same time, inflation headwinds are easing, and freight costs have normalized. Lowe’s has already adjusted its store footprint and labor model.
Any tailwind from rates or material deflation drops straight to the bottom line.
Macro shifts working in LOW’s favor:
Aging U.S. housing stock = more repair spend, fewer full moves
Slowing rate hikes = potential unlock for larger project financing
Homeowners investing in upgrades over relocations
Supply chain costs trending down vs. 2023 peak
The backdrop isn’t booming, but it doesn’t have to. A slow normalization is enough to give Lowe’s room to expand its margin and recover multiple.
Risks and Re-Rating Potential
Lowe’s isn’t bulletproof. Revenue declined 2% last quarter, and operating cash flow dropped sharply.
Consumer discretionary categories remain under pressure, especially at the lower end. If interest rates stay elevated into 2026, big-ticket projects could stay on hold longer than expected.
Momentum also remains soft. LOW lags its sector, carries a D+ on that metric, and hasn’t shown much technical strength since Q1.
Guidance may be holding, but price action hasn’t followed, and that weighs on short-term positioning.
What balances the scale: valuation. Lowe’s trades at 18.4x forward earnings, compared to 21.3x for its industry. The PEG ratio sits at 2.14, slightly under the 2.31 peer average. That gap gives the stock breathing room, even if macro pressure sticks around.
What to watch near term:
Continued softness in DIY and seasonal categories
Weak Pro comps would challenge margin trajectory
High single-digit dividend growth may cap future buyback pace
Missed Q2 revenue could stall any multiple expansion
The market has already priced in a cautious base case. If Lowe’s clears a low bar in Q2 and holds FY guidance, there’s room for re-rating without a high bar for perfection.
Final Word: Betting on the Mispriced Compounders
Lowe’s hasn’t broken. It’s been mispriced.
The business is still generating consistent earnings, raising dividends, and buying back shares. Institutional ownership hasn’t flinched.
Forward estimates continue to trend up. But the stock trades like it’s in structural decline, not like a cash-generating operator pulling down $84 billion in annual sales.
This is the kind of setup that rarely lasts. The bar for upside isn’t tied to a housing surge or a major pivot. Lowe’s only needs to keep executing.
If August earnings come through clean and FY guidance holds, that’s enough to reset sentiment and push the stock back into the $260s.
Value names don’t re-rate on hype. They re-rate on consistency. Lowe’s has that; the market just hasn’t caught up yet. I’d rather be early on that than chase it once the chart wakes up.
Action Recap
✅ Buy Zone: Accumulate under $235 ahead of Q2 earnings on August 20
✅ Catalysts to Watch: Pro segment trends, cash flow rebound, and any upside in Q2 comp sales
✅ Medium-Term Target: $260–$270, based on stable FY26 EPS and reversion to sector average multiple
✅ Risk Management Tip: Trim exposure if Pro growth stalls or FY guidance is cut post-Q2
The setup is active. The valuation is compressed. If Lowe’s delivers a clean quarter, the repricing window could move quickly and quietly.
I’ve seen this before; when a steady operator gets ignored long enough, the reset doesn’t start with a headline. It starts with a beat, a shrug, and then a gap you wish you had bought.
That’s our coverage for today, thanks for reading! Reply to this email with feedback or any names you want us to dig into next.
Best Regards,
—Noah Zelvis
Undervalued Edge
