Charlotte, NC, July 8--Lehman Brothers Inc. said Lowe's Cos.' same-store sales have accelerated over the past several weeks, prompting the firm to boost its earnings forecasts for the second quarter, 2003 and 2004.
In a research note Tuesday, Lehman analyst Alan Rifkin said better weather boosted customer traffic in stores, and selling prices for lumber have improved significantly in the quarter.
Deflationary lumber prices hurt Lowe's comparable-store sales by about 50 basis points in the first quarter, but if prices remain stable, improving lumber prices could help second-quarter same-store sales by as much as 50 basis points, he wrote.
Rifkin said he expects sales at Lowe's stores open at least one year to increase 3.5% in the second quarter, up from his previous forecast of 2% growth but still within the company's guidance for a 2% to 4% increase. He boosted his second-quarter earnings estimate by 2 cents to 71 cents a share, a penny above management's guidance for earnings between 68 and 70 cents a share. His revision to the second-quarter outlook brings Rifkin's full-year earnings estimate up 2 cents to $2.22 a share, above management's projection of $2.16 to $2.20 a share.
Rifkin also increased by 2 cents his 2004 earnings estimate to $2.55 a share and raised his 12-month price target to $53 from $42.
Analysts surveyed by Thomson First Call produced mean earnings estimates of 69 cents a share for the second quarter, $2.19 a share for 2003 and $2.52 a share for 2004.
NYSE-listed shares of Lowe's recently traded up $1.78, or 4%, to $45.27 on volume of 5.1 million. Average daily volume is 5.1 million.
Rifkin said Lowe's larger rival, Home Depot Inc., also has probably benefited from the rising lumber prices and improved weather. But he said he held off on raising his forecast for a 1% to 2% increase in comparable-store sales because sales will largely depend on Home Depot's progress with selected merchandise changes and its remodeling program.
Home Depot, a component of the Dow Jones Industrial Average, also traded higher Tuesday, even though the Dow and the Standard & Poor's 500 Stock Index were down. Shares of Home Depot were recently up 50 cents, or 1.5%, to $34.26.
Rifkin doesn't own shares of Lowe's or Home Depot, and neither company is an investment banking client.
