Lowe's Companies, Inc. LOW paired a second-quarter earnings beat with a reset of its fiscal 2026 outlook. The result puts more weight on whether Pro, Online and Home Services can keep offsetting weak discretionary DIY demand.
Those growth engines remain active, but housing pressure, softer transactions and margin headwinds are shaping the second-half earnings picture. The revised outlook makes near-term execution more important even as Lowe's continues investing in its Total Home strategy.
Lowe's Companies, Inc. Price, Consensus and EPS Surprise
Lowe's Companies, Inc. price-consensus-eps-surprise-chart | Lowe's Companies, Inc. Quote
Lowe's Q2 Beat Masks a Softer Sales Backdrop
Adjusted earnings reached $4.40 per share, up 1.6% year over year and above the Zacks Consensus Estimate of $4.22. Revenues increased 8.3% to $25,956 million but missed the consensus mark of $26,135 million.
Comparable sales rose just 0.2%. A 2.3% increase in average ticket offset a 2.1% decline in comparable transactions, showing that positive sales growth depended more on ticket growth than customer traffic.
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DIY Weakness Pulls Lowe's Guidance Lower
Lowe's now expects fiscal 2026 sales of about $92 billion, flat comparable sales, an adjusted operating margin of approximately 11.6% and adjusted earnings of about $12.25 per share. Each measure moved to the bottom of the prior guidance range.
Management also expects third-quarter adjusted earnings per share to be approximately 7% below the prior-year level. The reset reflects first-half results as well as current consumer demand and housing trends, keeping the near-term earnings setup restrained.
Pro and Online Keep Lowe's Growth Mix Intact
Pro, Online and Home Services helped Lowe's post a fifth consecutive quarter of positive comparable sales. Online sales increased 15.7%, while Pro and Home Services again contributed growth despite softer discretionary DIY spending.
The Home Depot, Inc. HD reported a 1.7% comparable-sales increase in its second quarter of fiscal 2026 and reaffirmed its full-year guidance. Its management also said customers continued to engage in smaller projects, showing that cautious project spending extends across home improvement.
Acquisitions Add Scale but Also Near-Term Drag for LOW
Foundation Building Materials and Artisan Design Group extend Lowe's reach into distribution, construction and installation. Yet residential construction pressure is holding back the near-term contribution, with ADG fully exposed to that market and about 45% of FBM exposed.
Builders FirstSource, Inc. BLDR reported an 8.8% second-quarter sales decline, primarily because of lower housing starts and related headwinds. That backdrop helps frame the pressure facing construction-linked demand as Lowe's integrates FBM and ADG.
Margins Face Fuel, Freight, and Promo Pressure at Lowe's
Second-quarter gross margin was 33.0%, down 80 basis points from the prior-year adjusted rate, including dilution from FBM and ADG. An approximately $80 million tariff-refund benefit added about 30 basis points but was largely offset by elevated fuel and transportation costs.
Competitive pricing added another risk late in the quarter. Management said rivals used tariff refunds to lower prices in seasonal categories, affecting Lowe's July performance, while the company chose not to match promotions that fell outside its financial plan.
LOW's Near-Term Signal Stays Cautious
Lowe's growth platforms continue to advance, but the revised outlook leaves macro pressure and profitability as the more immediate earnings issues. The next phase depends on sustaining Pro, digital and services momentum while DIY and housing demand remain soft.
LOW currently carries a Zacks Rank #4 (Sell), which points to an unfavorable near-term earnings-estimate trend. Its VGM Score of B, Growth Score of B and Momentum Score of B show comparatively favorable characteristics in those styles, while its Value Score of C is less favorable. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks Style Scores are designed to complement the Zacks Rank rather than override it. The current combination therefore keeps the short-term signal cautious even though several underlying style characteristics remain supportive.
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This article originally published on Zacks Investment Research (zacks.com).