Lowe’s Earnings Report Expected to Show Decline in Revenue and Profit
Lowe’s (NYSE: LOW) is set to announce its fiscal first-quarter earnings on Wednesday, May 21, 2025. Analysts anticipate earnings of $2.89 per share along with a revenue of $21.03 billion. This would mark a 6% decrease in earnings and a 2% drop in sales compared to last year, which saw figures of $3.06 per share and $21.36 billion in revenue. Historically, Lowe’s stock has risen 55% of the time following earnings reports, with a typical one-day increase of 1.7% and a maximum recorded rise of 10%.
Economic Challenges Ahead
The company faces significant economic headwinds linked to its business model. It procures a large portion of its products globally, relying on key supply relationships in China, Canada, and Mexico. This global sourcing approach, together with a customer base concentrated mainly in North America, exposes Lowe’s to potential trade disruptions and tariffs. Specifically, product categories like lumber, steel, aluminum, plumbing fixtures, and various tools are notably at risk.
Impact of Softening Demand
Additionally, demand from do-it-yourself (DIY) customers, who contribute around 70% of Lowe’s sales, has begun to wane. Many of these customers appear more hesitant to invest in home remodeling and upgrades. Despite a current market capitalization of $130 billion, the company reported $84 billion in revenue, $10 billion in operating profit, and $7 billion in net income over the last twelve months.
Strategic Considerations for Traders
For event-driven traders, examining historical patterns might provide an advantage in anticipating market movements before and after the earnings release. If the goal is to pursue upside opportunities with lower volatility compared to individual stocks, consider options like the Trefis High Quality portfolio, which has outperformed the S&P 500 and yielded over 91% returns since its inception.
Lowe’s Post-Earnings Returns: Insights and Correlation Analysis
Lowe’s Historical Odds of Positive Post-Earnings Return
Analyzing one-day (1D) post-earnings returns for Lowe’s reveals several key statistics:
- Over the past five years, there have been 20 earnings data points, with 11 positive and 9 negative 1D returns. This indicates positive returns occurred approximately 55% of the time.
- When examining the last 3 years, this percentage shifts to 50%.
- The median of the 11 positive returns stands at 1.7%, while the median of the 9 negative returns is -3.7%.
Additional statistics on 5-day (5D) and 21-day (21D) returns following earnings are detailed in the table below.
Correlation Between 1D, 5D, and 21D Historical Returns
A strategic approach to managing risk involves understanding the correlation between short-term and medium-term returns post-earnings. By identifying the strongest correlations, traders can make informed decisions. For instance, if there is a high correlation between 1D and 5D returns, a positive 1D return could suggest a “long” position for the subsequent 5 days. Below is correlation data based on both 5-year and 3-year histories, where the term 1D_5D indicates the relationship between 1D post-earnings returns and the following 5D returns.
LOW Correlation Between 1D, 5D and 21D Historical Returns
Is There Any Correlation With Peer Earnings?
The performance of peers can influence Lowe’s post-earnings stock reactions. In some cases, market pricing may begin before earnings announcements. Historical data comparing Lowe’s post-earnings performance with that of peers who reported earnings shortly before Lowe’s reveals these trends. Notably, peer stock returns similarly represent post-earnings one-day (1D) returns for a fair assessment.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
