Lowe’s Shares Rise After Earnings Blow Past Estimates and Company Lifts Outlook

Shares of the home improvement retailer Lowe’s rose over 3% on Wednesday after the company reported better-than-expected earnings in the holiday quarter and lifted annual sales and profit outlook.

The Mooresville, North Carolina-based retailer reported quarterly adjusted earnings of $1.78​​ per share, beating the Wall Street consensus estimates of $1.71 per share.

The company that distributes building materials and supplies through stores in the United States said its revenue jumped over 5.0% to $21.34 billion from a year earlier. That too topped the market expectations of $20.90 billion.

Lowe’s expects to reach $97 billion to $99 billion in sales for its fiscal 2022, up from a previous forecast of $94 billion to $97 billion. Earnings per share are expected to increase from $12.25 to $13 in the company’s last forecast to $13.10 to $13.60 this year.

Lowe’s beat consensus estimates on comps, gross margins and operating margins, as well as EPS. This compares to HD’s print yesterday which was better on comps but not as strong on gross margins. And, after giving initial 2022 guidance just two months ago, Lowe’s (LOW) raised their outlook next year to above consensus levels, which we were not expecting,” noted Michael Baker,  Senior Research Analyst at D.A. Davidson.

“Our key theme of a company-specific improvement played out this quarter, driven by LOW’s ability to close the gap with HD both on pro penetration and operating margins. And, like HD, Lowe’s 4Q comp was better than 3Q for the 10th of the last 13th years.”

Lowe’s stock traded 3.25% higher at $221.53. The stock fell over 14% so far this year after surging over 61% in 2021.

Analyst Comments

“With home center EPS now wrapped up, we’re incrementally confident that the sector remains attractive for investment. Lowe’s (LOW) 2-yr comp seq. accelerated (like HD) despite stimulus headwinds, and MTD sales reveal a sustained trend. We forecast sales above the guidance midpoint, believing an aged housing stock, refined DIY skillsets, and pricing can slightly outweigh rising rates and wallet share rotation toward services for positive dollar growth,” noted Jonathan Matuszewski, equity analyst at Jefferies.

Lowe’s Stock Price Forecast

Fourteen analysts who offered stock ratings for Lowe’s in the last three months forecast the average price in 12 months of $287.46 with a high forecast of $300.00 and a low forecast of $275.00.

The average price target represents a 30.24% change from the last price of $220.72. Of those 14 analysts, 13 rated “Buy”, one rated “Hold”, while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $280 with a high of $365 under a bull scenario and $190 under the worst-case scenario. The investment bank gave an ” Overweight ” rating on the home improvement retailer’s stock.

“Strong results and guide, could be a momentum shifter in terms of sentiment. 13% EBIT margins in sight, albeit with an extra week. Margin expansion, underpinned by improving GM’s should be rewarded. OW, $280 PT,” noted Simeon Gutman, equity analyst at Morgan Stanley.

Several analysts have also updated their stock outlook. Citigroup raised the price target to $292 from $270. Truist Securities lifted the price objective to $293 from $284. Evercore ISI cut the target price to $270 from $280.

Technical analysis suggests it is good to hold as 100-day Moving Average and 100-200-day MACD Oscillator gives a mixed signal.

Check out FX Empire’s earnings calendar

Lowe’s Is Well Worth Watching Ahead of Q4 Earnings; Target Price $287

Home improvement retailer Lowe’s would post higher earnings and revenues in the holiday quarter, but rising transportation and labour costs could impact the results.

The Mooresville, North Carolina-based retailer to report its fourth-quarter earnings of $1.69 per share, representing year-over-year growth of over 27% from $1.33 per share seen in the same period a year ago.

The company that distributes building materials and supplies through stores in the United States would post revenue growth of over 2% to $20.82 billion.

In December, the retailer said it anticipates total sales to be between $94 billion and $97 billion for 2022. Lowe’s predicts a 3% decrease in same-store sales this year. Moreover, it forecast earnings per share of $12.25 to $13.

“We expect the company’s stock to trade higher post-fourth-quarter results – as its revenues and earnings are likely to beat consensus estimates. The home improvement retailer has invested quickly and heavily to build out its digital capabilities to accommodate its demand surge during the pandemic. In fact, the home improvement retailer is able to maintain its sales momentum as consumers continue to take on more projects,” noted equity analysts at TREFIS.

“Factors such as an increase in remote working, online school classes, and colder weather should bode well for the company’s continued sales momentum into the fourth quarter as well. Our forecast indicates that Lowe’s valuation is $256 per share, which is almost 15% higher than the current market price.”

Lowe’s stock traded 2.33% lower at $217.58. The stock fell nearly 16% so far this year after surging over 61% in 2021.

Analyst Comments

“We view Lowe’s (LOW) favourably given its longer-term transformation opportunity and structural industry tailwinds, with substantial near-term uplifts from COVID-19 spending shifts that likely translate to longer-term sales retention,” noted Simeon Gutman, equity analyst at Morgan Stanley.

“Assuming a healthy underlying housing backdrop, we think comps can accelerate longer-term from stronger sales/sq ft trends, driven by e-comm accelerating, better in-stocks, product refreshes/exclusive launches, greater traction with Pro initiatives, and removing friction from the customer shopping experience. Combined with productivity initiatives, this should enable EBIT margin expansion going forward.”

Lowe’s Stock Price Forecast

Fourteen analysts who offered stock ratings for Lowe’s in the last three months forecast the average price in 12 months of $287.46 with a high forecast of $300.00 and a low forecast of $275.00.

The average price target represents a 30.52% change from the last price of $220.24. Of those 14 analysts, 13 rated “Buy”, one rated “Hold”, while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $280 with a high of $365 under a bull scenario and $190 under the worst-case scenario. The investment bank gave an ” Overweight ” rating on the home improvement retailer’s stock.

Several analysts have also updated their stock outlook. Citigroup raised the price target to $292 from $270. Truist Securities lifted the price objective to $293 from $284. Evercore ISI cut the target price to $270 from $280.

Technical analysis suggests it is good to hold as 100-day Moving Average and 100-200-day MACD Oscillator gives a mixed signal.

Check out FX Empire’s earnings calendar

Wall Street Week Ahead Earnings: Caesars Entertainment, Home Depot, Lowe’s and Moderna in Focus

Investors will focus on December quarter earnings for stocks that are economically sensitive, which should show better profits than technology stocks. Increasing Treasury yields and risk aversion could hit the stock market hard over the coming months. In addition, investors will closely monitor the latest news on the rapidly spread Omicron coronavirus variant to see how it impacts earnings in 2022.

Earnings Calendar For The Week Of February 21

Monday (February 21)

The New York Stock Exchange and NASDAQ will all be closed on Monday, February 21 for President’s Day.

Tuesday (February 22)

IN THE SPOTLIGHT: CAESARS ENTERTAINMENT, HOME DEPOT

CAESARS: The largest casino-entertainment Company in the U.S. company is expected to report its fourth-quarter loss of $-0.71 per share, up over 58%, better compared to a loss of $-1.7 per share seen in the same period a year ago. The Las Vegas-based company would post revenue growth of over 77% to $2.58 billion.

Caesars Entertainment (CZR) is currently trading at below its historical NTM multiple on 2023e EBITDAR, despite our expectation of >1,000bps higher core casino margins and faster growth. We believe regional casino markets (55% of mix) have structural tailwinds from customers acquired post-COVID and sports betting legalization,” noted Thomas Allen, equity analyst at Morgan Stanley.

“We expect CZR to improve its sports betting / iGaming market share in coming qtrs, a key driver to Gaming stocks in recent years. High leverage now (7.5x at YE21) but significant FCF and a planned Vegas asset should drive leverage to ~5x by YE22, opening up a broader investor base.”

HOME DEPOT: The largest home improvement retailer in the United States is expected to report its fourth-quarter earnings of $3.22 per share, which represents year-over-year growth of over 17% from $2.74 per share seen in the same period a year ago.

The home improvement retailer would post revenue growth of over 7% to $34.6 billion. The company has beaten consensus earnings estimates in most of the quarters in the last two years, at least.

“We are Overweight Home Depot (HD) given its best-in-class nature and structural housing tailwinds beyond N-T disruption from COVID-19. The stock seems attractively valued in the context of a potential 2021/2022 economic/housing boom,” noted Simeon Gutman, equity analyst at Morgan Stanley.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 22

TICKER COMPANY EPS FORECAST
CNP CenterPoint Energy $0.33
HR Healthcare Realty Trust $0.44
HD Home Depot $3.22
M Macy’s $1.91
MDT Medtronic $1.38
PANW Palo Alto Networks $-0.42
TOL Toll Brothers $1.26

 

Wednesday (February 23)

IN THE SPOTLIGHT: LOWE’S

Home improvement retailer Lowe’s is expected to report its fourth-quarter earnings of $1.69 per share, which represents year-over-year growth of over 27% from $1.33 per share seen in the same period a year ago. The company that distributes building materials and supplies through stores in the United States would post revenue growth of over 2% to $20.82 billion.

“We view Lowe’s (LOW) favourably given its longer-term transformation opportunity and structural industry tailwinds, with substantial near-term uplifts from COVID-19 spending shifts that likely translate to longer-term sales retention,” noted Simeon Gutman, equity analyst at Morgan Stanley.

“Assuming a healthy underlying housing backdrop, we think comps can accelerate longer-term from stronger sales/sq ft trends, driven by e-comm accelerating, better in-stocks, product refreshes/exclusive launches, greater traction with Pro initiatives, and removing friction from the customer shopping experience. Combined with productivity initiatives, this should enable EBIT margin expansion going forward.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 23

TICKER COMPANY EPS FORECAST
BBWI Bath & Body Works $2.25
BCS Barclays $0.29
EBAY eBay $0.82
HEI Heico $0.57
NTAP NetApp $1.07

 

Thursday (February 24)

IN THE SPOTLIGHT: MODERNA

Moderna, the biotech company focused on drug discovery, is expected to report its fourth-quarter earnings of $8.62 per share, which represents year-over-year growth of over 1,340% from a loss of -$0.69 per share seen in the same period a year ago.

The Massachusetts-based biotechnology company would post revenue growth of 1,075% to around $6.71 billion.

“We are Equal-weight Moderna. While we believe there is long-term upside for Moderna, we believe the significant valuation increase associated with the success of the COVID-19 vaccine limits the near-term upside,” noted Matthew Harrison, equity analyst at Morgan Stanley.

“The company has taken an industrialized approach to developing mRNA based therapeutics and has rapidly generated a broad pipeline of 21 programs, 11 of which have entered clinical development. We believe Moderna’s mRNA drug development platform is more diversified and scalable compared with competitors, and is validated through broad partnerships with Merck and AstraZeneca. We see vaccines and rare diseases as the key valuation drivers of the company.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 24

TICKER COMPANY EPS FORECAST
ADSK Autodesk $0.89
AXON Axon Enterprise $-0.07
SQ Block $-0.06
CVNA Carvana $-0.76
DELL Dell Technologies $1.94
DISCA Discovery $0.84
GCI Gannett $-0.03
NTES NetEase $0.82
NKLA Nikola $-0.46
VMW VMware $1.44
ZS Zscaler $-0.57

 

Friday (February 25)

TICKER COMPANY EPS FORECAST
AES AES Corp. $0.46
CNK Cinemark Holdings $-0.16
DSX Diana Shipping $0.30
SSP E.W. Scripps $0.46
FL Foot Locker $1.46

 

Top Stocks To Invest in for 2022

They’re the outliers of the market. These types of stocks have three traits: strong fundamentals, great technicals, and a history of Big Money activity in the shares. Outlier stocks see a lot of Big Money buying.

Oftentimes, that can be institutional activity. We’ll go over what that looks like in a bit. But first, the five stocks we see as top long-term candidates for 2022 are SHOP, ALGN, LOW, PYPL, & F.

For MAPsignals, we believe that Big Money trading can alert you to the forward fundamental picture of a stock. We want the odds on our side when looking for the highest quality stocks.

Up first is Shopify, Inc. (SHOP), which is an integrated commerce and marketing platform.

Great companies on pullbacks are worthy of attention. Check out SHOP:

  • 1-month performance (-15.00%)
  • Historical Big Money signals

Just to show you what our Big Money signal looks like, have a look at the top buy signals Shopify has made the past few years.

Blue bars are showing that SHOP was likely being bought by a Big Money player, according to MAPsignals.

When you see a lot of them, I call it the stairway to heaven:

Source: www.MAPsignals.com

But, what about fundamentals? As you can see, Shopify’s revenue numbers have been strong while earnings have lagged, though I expect earnings to improve in the years ahead:

  • 3-year sales growth rate (+64.02%)
  • 3-year earnings growth rate (-63.12%)

Next up is Align Technology, Inc. (ALGN), which is a medical device company (the makers of Invisalign teeth aligners).

Check out these technicals for ALGN:

  • 1-month performance (-3.20%)
  • Historical Big Money signals

There’s been a price dip, but let’s look long-term. These are the top buy signals Align Technology has made since 2015. Clearly the Big Money has been consistent for years:

Source: www.MAPsignals.com

Let’s look at fundamentals. As you can see, Align Technology has had huge growth. I see that continuing in the years ahead:

  • 3-year sales growth rate = (+19.52%)
  • 3-year earnings growth rate = (+87.95%)

Another name for 2022 is Lowe’s Companies, Inc. (LOW), the popular home improvement chain.

Strong candidates for growth usually have Big Money buying the shares. Lowe’s has that. Also, the stock has been ramping up lately:

  • 1-month performance (+3.20%)
  • Historical Big Money signals

Below are the Big Money signals Lowe’s has made since 2010. That’s JUICE!

Source: www.MAPsignals.com

Now let’s look a bit closer. The growth is impressive, and I expect more of the same in the future:

  • 3-year sales growth rate = (+9.8%)
  • 3-year earnings growth rate = (+34.7%)

Number four on the list is payment processor PayPal Holdings Inc. (PYPL). It’s been on a sell streak lately, but I think this is an opportunity and an attractive entry point for long-term investors.

Here are the technicals important to me:

  • 1-month performance (+2.56%)
  • Historical Big Money signals

Below are the Big Money signals for PYPL since 2015:

Source: www.MAPsignals.com

Let’s look under the hood. Despite recent price volatility, the fundamentals indicate PayPal has been growing nicely:

  • 3-year sales growth rate = (+36.06%)
  • 3-year earnings growth rate = (+17.96%)

Our last 2022 candidate is automotive giant Ford Motor Company (F). It was a Big Money favorite in the 1990s and seems to be making a comeback. Consider this a turnaround play based on Ford’s electric vehicle present and future.

Check out these technicals:

  • 1-month performance (+27.50%)
  • Historical Big Money signals

Ford is a high-quality stock and has several Big Money buys (green bars) in the last year:

Source: www.MAPsignals.com

Now look at the fundamentals. Sales and earnings haven’t been great. But I expect that to change going forward as the company’s product shift unfolds in the market:

  • 3-year sales growth rate = (-6.31%)
  • 3-year earnings growth rate = (-992.66%)

The Bottom Line

SHOP, ALGN, LOW, PYPL, & F represent top stocks for 2022. Strong fundamentals, future prospects, and Big Money buy signals make these stocks worthy of extra attention.

To learn more about MAPsignals’ Big Money process please visit: www.mapsignals.com

Disclosure: the author holds long positions in F & PYPL in personal accounts and long positions in PYPL in managed accounts.

Investment Research Disclaimer

https://mapsignals.com/contact/

 

Lowe’s Builds on Big Money

So, what’s Big Money? Said simply, that’s when a stock goes up in price alongside chunky volumes. It’s indicative of institutions betting on the shares.

Smart money managers are always looking for the next hot stock. And Lowe’s has many fundamental qualities that are attractive.

This sets up well for the stock going forward. But how the shares have been trading points to more upside. As I’ll show you, the Big Money has been consistent in the shares all year.

You see, fund managers are always looking to bet on the next outlier stocks…the best in class. They spend countless hours sizing up companies, reading reports, speaking to analysts…you name it. When they find a company firing on all cylinders, they pounce in a big way.

That’s why I’ve learned how critical it is to gauge Big Money demand for shares. To show you what I mean, have a look at all the big money signals LOW has made the last year.

The last few weeks have seen Big Money activity, too. Each green bar signals big trading volumes as the stock ramped in price:

Chart, histogram

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Source: www.mapsignals.com

In 2021, the stock has attracted 15 Big Money buy signals. Generally speaking, recent green bars could mean more upside is ahead.

Now, let’s check out technical action grabbing my attention:

  • 1-month outperformance vs. Consumer Discretionary Select Sector SPDR Fund (+2.68% vs. XLY)

Outperformance is important for leading stocks.

Next, it’s a good idea to check under the hood. Meaning, I want to make sure the fundamental story is strong too. As you can see, Lowe’s has been growing sales at a double-digit rate. Take a look:

  • 1-year sales growth rate (+17.7%)
  • 3-year earnings growth rate (+34.7%)

Source: FactSet

Marrying great fundamentals with technically superior stocks is a winning recipe over the long-term.

In fact, LOW has been a top-rated stock at my research firm, MAPsignals, for years. That means the stock saw buy pressure, strong technicals, and growing fundamentals. We have a ranking process that showcases stocks like this on a weekly basis.

LOW has a lot of qualities that are attracting Big Money. It’s taken in Big Money 33 times since 2000. But there was a pause from 2004-12. Since 2012, it’s made this list 9 times, with its first appearance on 11/27/2012… and gaining 606.06% since. The blue bars below show the times that Lowe’s was a top pick since 2012:

Chart, histogram

Description automatically generated

Source: www.mapsignals.com

It’s been a top stock in the consumer discretionary sector according to the MAPsignals process. I wouldn’t be surprised if LOW makes additional appearances in the years to come. Let’s tie this all together.

The Bottom Line

Lowe’s rally could have further to go. Big money buying in the shares is signaling to take notice. Shares could be positioned for further upside. Given the historical gains in share price and strong fundamentals, this stock could be worth a spot in a growth-oriented portfolio.

Disclosure: the author holds no positions in LOW in personal or managed accounts at the time of publication.

Learn more about the MAPsignals process here.

Disclaimer

https://mapsignals.com/contact/

 

Lowe’s Hits Record High in Pre-Market Trading After Q3 Earnings Beat

Lowe’s shares hit a new record high on Wednesday after the Mooresville, North Carolina-based home improvement retailer reported better-than-expected earnings in the third quarter and lifted its full-year sales forecast.

The home improvement retailer reported net earnings of $1.9 billion and diluted earnings per share (EPS) of $2.73 for the quarter ended October 29 compared to net earnings of $692 million and diluted EPS of $0.91 in the third quarter of 2020.

Excluding charges in the prior-year period related to the extinguishment of debt, third-quarter diluted EPS of $2.73 increased 38% from adjusted diluted EPS of $1.98 in the third quarter of 2021. That was higher than the market expectations of $2.33 per share.

Total sales for the third quarter were $22.9 billion compared to $22.3 billion in the third quarter of 2020, and comparable sales increased 2.2%, beating the Wall Street estimates of a 2.9% decline. Comparable sales for the U.S. home improvement business increased 2.6% for the third quarter.

Following this, Lowe’s shares rose over 3.5% to $253.50 in pre-market trading on Wednesday. The stock rose nearly 60% so far this year.

Analyst Comments

“Results solid, show top-line health and most importantly, a well-managed business in the face of supply chain/cost challenges. Home Improvement channel the best inflation hedge in Hardline/Broadline retail thus far,” noted Simeon Gutman, equity analyst at Morgan Stanley.

“We view Lowe’s (LOW) favourably given its longer-term transformation opportunity and structural industry tailwinds, with substantial near-term uplifts from COVID-19 spending shifts that likely translate to longer-term sales retention. Assuming a healthy underlying housing backdrop, we think comps can accelerate longer-term from stronger sales/sq ft trends, driven by e-comm accelerating, better in-stocks, product refreshes/exclusive launches, greater traction with Pro initiatives, and removing friction from the customer shopping experience.”

Lowe’s Stock Price Forecast

Fourteen analysts who offered stock ratings for Lowe’s in the last three months forecast the average price in 12 months of $241.82 with a high forecast of $265.00 and a low forecast of $217.00.

The average price target represents a -1.21% change from the last price of $244.78. From those 14 analysts, 11 rated “Buy”, three rated “Hold” while none rated “Sell”, according to Tipranks.

Technical analysis suggests it is good to buy as 100-day Moving Average, and 100-200-day MACD Oscillator signals a strong buying opportunity.

Morgan Stanley gave the base target price of $255 with a high of $310 under a bull scenario and $150 under the worst-case scenario. The firm gave an “Overweight” rating on the home improvement retailer’s stock.

Several other analysts have also updated their stock outlook. Piper Sandler raised the target price to $231 from $225. Telsey Advisory Group lifted the target price to $250 from $240. Citigroup upped the price target to $270 from $239.

Lowe’s Hovers Near Record High Ahead of Q3 Earnings

Lowe’s Companies Inc, a home improvement retailer, is expected to report its third-quarter earnings of $2.33 per share, which represents year-over-year growth of over 17% from $1.98 per share seen in the same period a year ago.

The Mooresville, North Carolina-based company’s revenue would decline more than 1% to $22 billion from $22.31 billion a year earlier. The company has beaten earnings three times in the last four quarters.

Lowe’s is impressed with its performance during the first half of fiscal 2021. Management highlighted that the strong sales trends have continued into August. Accordingly, the company raised its view for the fiscal,” noted analysts at ZACKS Research.

The company now expects to generate revenues of nearly $92 billion, up from its previous prediction of $86 billion. According to the latest top-line view, growth was nearly 2.7% year over year, ZACKS Research added.

On a two-year stacked basis, it represents a comparable sales growth of nearly 30%. Operating margins should be about 12.2%, while gross margins will be about 1% higher. In fiscal 2021, the company expects to repurchase shares worth at least $9 billion.

Lowe’s shares rose over 46% so far this year. The stock ended 0.59% lower at $234.92 on Monday – not far from the record high of $539.15 hit early this month.

Lowe’s Stock Price Forecast

Fourteen analysts who offered stock ratings for Lowe’s in the last three months forecast the average price in 12 months of $241.82 with a high forecast of $265.00 and a low forecast of $217.00.

The average price target represents a 2.94% change from the last price of $234.92. From those 14 analysts, 11 rated “Buy”, three rated “Hold” while none rated “Sell”, according to Tipranks.

Technical analysis suggests it is good to buy as 100-day Moving Average, and 100-200-day MACD Oscillator signals a strong buying opportunity.

Morgan Stanley gave the base target price of $255 with a high of $310 under a bull scenario and $150 under the worst-case scenario. The firm gave an “Overweight” rating on the home improvement retailer’s stock.

Several other analysts have also updated their stock outlook. Piper Sandler raised the target price to $231 from $225. Telsey Advisory Group lifted the target price to $250 from $240. Citigroup upped the price target to $270 from $239.

Analyst Comments

“We view Lowe’s (LOW) favourably given its longer-term transformation opportunity and structural industry tailwinds, with substantial near-term uplifts from COVID-19 spending shifts that likely translate to longer-term sales retention,” noted Simeon Gutman, equity analyst at Morgan Stanley.

“Assuming a healthy underlying housing backdrop, we think comps can accelerate longer-term from stronger sales/sq ft trends, driven by e-comm accelerating, better in-stocks, product refreshes/exclusive launches, greater traction with Pro initiatives, and removing friction from the customer shopping experience.”

Check out FX Empire’s earnings calendar

What Fuels The Stock Market Now?

An outstanding earnings season and signs that economic activity are picking back up are clashing with unrelenting inflation, difficulty finding more labor, and continued supply chain logjams.

Inflation

Most insiders believe inflation has further to climb, though the consensus right now is calling for a peak around the beginning of Q2 next year. With big shopping holidays in the U.S. coming up, followed closely by Chinese New Year at the beginning of February 2022, shipping and transportation logjams aren’t expected to find much relief in the near-term.

Meaning inflation pressures will likely continue. How far inflation will climb as the severe supply chain dislocations drag on is a huge unknown. Some Wall street investors are concerned that the Fed might feel compelled to end its asset purchases and hike rates much sooner than expected if monthly inflation keeps accelerating.

What might be even more worrisome is the fear that some of these price increases could be more permanent in nature, so how much overall inflation will pull back in the long run is starting to become a bigger talking point.

Demand and supply chain

Supply chain insiders warn that many companies are front-loading inventories in an effort to avoid running out of critical materials, which could bite in the long run if demand suddenly drops off. A lot of manufacturers have also increased production capacity for products that currently face shortages. The risk is that once back orders are filled and demand retreats, stockpiling and excess production could result in an oversupply situation in some areas, along with much lower profits and total revenues.

Another worry right now is that demand starts to retreats due to the current inflationary environment especially with everyday items like food and gasoline costing substantially more. That has investors anxious to see the latest Consumer Sentiment read being released today which is expected to edge higher vs. last month.

Investors are closing tracking the inflation expectation gauges in the report as typically the higher those climb, the more consumers tend to pull back on spending.

Data to watch next week

Looking towards next week, the economic data flow picks up with key releases including Empire State Manufacturing on Monday; Retail Sales, Import/Export Prices, Industrial Production, Business Inventories, and the NAHB Housing Market Index on Tuesday; Housing Starts and Building Permits on Wednesday; and the Philadelphia Fed Index on Thursday.

On the earnings front, Q3 reporting is just about wrapped up with companies in the S&P 500 index reporting revenue growth of more than +17%, the second highest on record behind only Q2 2021’s growth of over +25%, according to FactSet. Earnings themselves are on track to exceed +40%. AstraZeneca is today’s earnings highlight. Earnings next week include several big retailers which will provide some more clues as to how consumer demand is trending as well as updates on supply chain struggles. Investors are also keen to hear how holiday hiring is going.

Key earnings reports next week will include Advanced Auto Parts, Lucid, Tyson, and Warner Music on Monday; Home Depot and Walmart on Tuesday; Bath & Body Works, Cisco, Lowe’s, NVIDIA, Target, TJX, and Victoria’s Secret on Wednesday; Alibaba, Applied Materials, Intuit, Kohl’s, Macy’s, Palo Alto Networks, Ross Stores, and Williams Sonoma on Thursday; and The Buckle and Foot Locker on Friday.

Checking in on the geopolitical front, the U.S. is warning that Russia may be planning a full-scale invasion of Ukraine. U.S. officials say they’ve briefed their EU counterparts about concerns over a possible military operation, citing a buildup of Russian troops along the Ukraine border. Tensions are boiling still in Belarus and Russia is fanning the flames on that front as well.

SP500 commentary

ES ##-## (Daily) 2021_11_14 (1_49_54 AM)

The bearish accumulation divergence played very well last week. Moreover, the Advance Decline Line is weaker than the price is. It is also a negative factor in the short term. Potentially SP500 started the formation of the bull flag. Finding support at lower levels would be a great buying point with a target of 4800.

The major economic indicators are still bullish despite rising inflation. 4500 level is a psychological level bears will target if 4600 fails. Current levels can be considered only for intraday trading. At the same time, lower levels are needed to get a good risk/reward ratio for swing traders.

For a look at all of today’s economic events, check out our economic calendar.

Earnings Week Ahead: Advance Auto Parts, Home Depot, Nvidia and Ross Stores in Focus

Earnings Calendar For The Week Of November 15

Monday (November 15)

IN THE SPOTLIGHT: ADVANCE AUTO PARTS

The leading automotive aftermarket parts retailer Advance Auto Parts is expected to report its third-quarter earnings of $2.87 per share, which represents year-over-year growth of over 2% from $2.81 per share seen in the same period a year ago.

The Raleigh, North Carolina-based company would post revenue growth of nearly 2% to $2.6 billion up from $2.54 billion registered a year earlier. The company has beaten earnings per share (EPS) estimates three times in the last four quarters.

Advance Auto Parts (AAP) operates in a defensive (recession-resistant) category and has one of the largest long-term EBIT margin expansion opportunities in our coverage (we estimate 300-400 bps over time). COVID-19 slowed parts of AAP’s transformation but gross and EBIT margin upside from internal initiatives is still expected beginning in 2021,” noted Simeon Gutman, equity analyst at Morgan Stanley.

“Significant and improving FCF generation plus share repurchases likely to enhance EPS growth. We think the combination of a defensive category, AAP’s progress generating stable top-line growth, and significant margin upside all make for an upside case. Slowing topline momentum and associated risk to margin trajectory balance the risk/reward skew.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE NOVEMBER 15

Ticker Company EPS Forecast
AAP Advance Auto Parts $2.87
JJSF J&J Snack Foods $1.28
CMP Compass Minerals International $0.62

Tuesday (November 16)

IN THE SPOTLIGHT: HOME DEPOT

The largest home improvement retailer in the United States, Home Depot, is expected to report its third-quarter earnings of $3.39 per share, which represents year-over-year growth of about 7% from $3.18 per share seen in the same period a year ago.

The home improvement retailer would post revenue growth of over 4% to $34.942 billion from $33.54 billion a year earlier. In the last two years, the company has beaten earnings per share (EPS) estimates in most of the quarters with a surprise of over 5%.

Home Depot shares have gained nearly 40% so far this year. The stock closed 1.36% higher at $372.63 on Friday. Home Depot’s better-than-expected results, which will be announced on Nov 16, could help the stock hit new all-time highs.

“Shares of Home Depot have risen and outpaced the industry year to date. The company boasts a robust surprise trend with the fifth straight quarter of earnings and sales beat in second-quarter fiscal 2021. Results gained from continued demand for home improvement projects, the robust housing market and ongoing investments. The company is effectively adapting to the demand for renovations and construction activities, driven by prudent investments,” noted analysts at ZACKS Research.

“It is gaining from growth in Pro and DIY customer categories as well as digital momentum. However, in the second quarter, the company witnessed year-over-year moderation in its comparable-store sales growth. This was due to the lapping of the high demand environment for home-improvement projects seen last year. Soft gross margin, stemming from increased penetration of lumber, has also been a drag.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE NOVEMBER 16

Ticker Company EPS Forecast
ICP Intermediate Capital £32.70
HSV Homeserve £6.60
ARMK Aramark $0.19
HD Home Depot $3.35
DLB Dolby Laboratories $0.35
LAND Land Securities £18.78
IMB Imperial Brands PLC £138.10

Wednesday (November 17)

IN THE SPOTLIGHT: NVIDIA

The Santa Clara, California- based multinational technology company, Nvidia, is expected to report its third-quarter earnings of $1.11 per share, which represents a year-over-year decline of over 60% from $2.91 per share seen in the same period a year ago.

The company, which designs graphics processing units for the gaming and professional markets, as well as system on a chip unit for the mobile computing and automotive market would post year-over-year revenue growth of over 40% to $6.8 billion.

According to Oppenheimer analyst Rick Schafer, Nvidia will report above-consensus October quarter results, lifting its price target to $350 from $235 and rating the company “outperform”.

“Supply constraints continue to weigh on the group, though we see Nvidia (NVDA), a top semi-supplier, as better positioned to secure capacity. The company’s leading soup-to-nuts software/hardware platform solidifies its AI accelerator dominance,” Oppenheimer analyst Rick Schafer wrote in his report, reported by Reuters.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE NOVEMBER 17

Ticker Company EPS Forecast
BLND British Land Company £8.75
SGE The Sage Group £11.11
LOW Lowe’s Companies $2.33
CPRT Copart $0.99
NVDA Nvidia $1.11
CPA Copa -$0.19
KLIC Kulicke And Soffa Industries $2.07
TTEK Tetra Tech $1.00
HI Hillenbrand $0.91
SSE SSE £11.80

Thursday (November 18)

IN THE SPOTLIGHT: ROSS STORES

The second-largest off-price retailer in the U.S., Ross Stores, is expected to report its third-quarter earnings of $0.79 per share, which represents a year-over-year decline of over 24% from $1.02 per share seen in the same period a year ago.

The U.S. home fashion chain would post year-over-year revenue growth of nearly 16% to $4.4 billion. The company has beaten earnings per share (EPS) estimates three times in the last four quarters.

“Market share capture from competitor bankruptcies & store closures, favourable customer fundamentals, and high exposure to Hispanics, the fastest-growing US population segment, support 6-8% long-term revenue growth and 10%+ annual EPS. Upward EPS revisions appear an ongoing positive share price catalyst. Profit flow-through is magnified when comps exceed the 1-2% plan in a typical year,” noted Kimberly Greenberger, equity analyst at Morgan Stanley.

“The ‘everyday value’ proposition fosters comp outperformance, while recessions accelerate customer acquisition. Low average selling prices ($8-10/unit) and narrow gross margin render selling online unprofitable at this price point.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE NOVEMBER 18

Ticker Company EPS Forecast
NG National Grid £15.70
HLMA Halma £21.19
RMG Royal Mail -£6.30
NJR New Jersey Resources $0.08
KSS Kohl’s $0.69
HP Helmerich & Payne -$0.50
MMS Maximus $0.87
BJ BJs Wholesale Club Holdings Inc $0.79
M Macy’s $0.29
BERY Berry Plastics $1.53
NUAN Nuance Communications $0.20
BRC Brady $0.76
ROST Ross Stores $0.79
INTU Intuit $0.97
FTCH Farfetch -$0.24
ESE ESCO Technologies $0.78

Friday (November 19)

Ticker Company EPS Forecast
BKE Buckle $0.80
FL Foot Locker $1.34

 

Best Dividend Stocks September 2021

The hallmark way I go about finding the best dividend stocks…the outliers, is by looking for quiet Big Money trading activity. Oftentimes, that can be institutional activity. I’ll go over why following the Big Money is so important in a bit. But, the 5 stocks I see as long-term dividend growth candidates are LOW, MSFT, RMD, EXR, & ABBV.

Over decades, I’ve learned that the true tell on great stocks is that big money consistently finds its way into the best companies out there… especially dividend paying stocks. Some of the biggest returns ever have come from holding stocks for many years and reinvesting dividends.

I want the odds on my side when looking for the highest quality dividend stocks…and I own many of them.

So, let’s get into it.

Up first is Lowe’s Companies Inc. (LOW), which is a large home improvements retailer. They’ve been raising their dividend for years.

Let’s first start with the technical picture.

When deciding on a strong candidate for long-term dividend growth, I look for stocks leading in price:

  • 1 month performance (+2.6%)
  • Historical Big Money buy signals

Below are the Big Money signals Lowe’s has made since 2015. Blue bars are showing that LOW was seeing big buy activity according to MAPsignals. Typically, the more Big Money signals, the stronger the stock:

ChartDescription automatically generated
Source: MAPsignals.com

On top of technicals, when deciding on the best dividend stock, you should look under the hood to see if the fundamental picture supports a long-term investment. As you can see, Lowe’s has a strong dividend history:

  • 3-year dividend growth rate (+13.3%)
  • Current dividend per share = .80
  • Forward yield = 1.57%
  • 3-year earnings growth rate (+34.66%)

Next up is Microsoft Corp. (MSFT), which is a leader in software, cloud computing, and gaming. They’ve also been a dividend grower for years.

When deciding on a strong candidate for long-term dividend growth, it’s a good idea to look for many years of dividend increases.

Now let’s look at recent performance:

  • 1-month performance (+5.37%)
  • Historical big money signals

Below are the big money signals that Microsoft has made since 2015. I expect more buy signals in the years to come.

Source: MAPsignals.com

On top of technicals, when deciding on the best dividend stock, you should look under the hood to see if the fundamental picture supports a long-term investment. As you can see, Microsoft has a nice dividend history. Their earnings growth has been stellar as well:

  • 3-year dividend growth rate (+9.9%)
  • Current dividend per share = .56
  • Forward yield = .74%
  • 3-year earnings growth rate (+63.68%)

Next, I’m looking at ResMed, Inc. (RMD), which is a medical device company. They have a solid dividend history.

When deciding on a strong candidate for long-term dividend growth, I look for strong recent performance:

  • 1 month performance (+10.18%)
  • Historical Big Money signals

Below are the big money signals that ResMed has made since 2015. It’s been quiet recently:

Chart, histogramDescription automatically generated
Source: MAPsignals.com

On top of technicals, when deciding on the best dividend stock, you should look under the hood to see if the fundamental picture supports a long-term investment. ResMed has been slow to raise their dividend, but they did recently:

  • 3-year dividend growth rate (+4.3%)
  • Current dividend per share = .42
  • Forward yield = .59%
  • 3-year earnings growth rate (+18.68%)

Next, I’m looking at Extra Space Storage, Inc. (EXR), which is a leading storage real estate firm. They recently raised their dividend.

When deciding on a strong candidate for long-term dividend growth, recent outperformance is great:

  • 1 month performance (+3.49%)
  • Historical Big Money signals

Below are the Big Money signals that Extra Space Storage has made since 2015.

Chart, histogramDescription automatically generated
Source: MAPsignals.com

On top of technicals, when deciding on the best dividend stock, let’s check up on the fundamentals. As you can see, Extra Space Storage has a solid dividend picture.

  • 3-year dividend growth rate (+13.2%)
  • Current dividend per share = 1.25
  • Forward yield = 2.83%
  • 3-year earnings growth rate (+0%)

Lastly, I’m looking at AbbVie, Inc. (ABBV), which is a leading pharmaceutical drug company. They’ve been growing their dividend for years.

When deciding on a strong candidate for long-term dividend growth, I like to look for recent leaders:

  • 1 month performance (+.99%)
  • Historical Big Money signals

Below are the Big Money signals that ABBV has made since 2015.

Source: MAPsignals.com

The last signal they made was a sell signal, but I don’t put much stock into that since it’s the only one.

On top of technicals, when deciding on the best dividend stock, you gotta see if the fundamental picture supports a long-term investment. AbbVie has been a steady grower:

  • 3-year dividend growth rate (+22.6%)
  • Current dividend per share = 1.30
  • Forward yield = 4.35%
  • 3-year earnings growth rate (+2.25%)

The Bottom Line

LOW, MSFT, RMD, EXR, & ABBV represent solid dividend choices. Given the strong historical dividend growth and Big Money signals, these stocks could be worth an extra look for a dividend investor.

Disclosure: the author holds long positions in MSFT, RMD, EXR, & ABBV in personal and managed accounts but no position in LOW at the time of filming.

To learn more about the MAPsignals process, click here: www.mapsignals.com

Disclaimer

Lowe’s Charts Its Own Course, Shares Up 10%

Shares of home-improvement retailer Lowe’s soared by a double-digit percentage on Wednesday on the heels of the company’s better-than-expected Q2 earnings report. Lowe’s investors were pleasantly surprised after rival company Home Depot’s quarterly results left that stock sinking just a day earlier.

Lowe’s reported a net profit of USD 3 billion or USD 4.25 per diluted share, which surpassed Wall Street’s estimates. Revenue came in at USD 27.6 billion, while comparable sales fell by 1.6%, though the damage was less than feared.

For the full year 2021, Lowe’s lifted its forecast to revenue of USD 92 billion and is targeting share buybacks worth USD 9 billion. Previously Lowe’s predicted full-year revenue of USD 86 billion.

Reports suggest that construction professionals and repairmen are buying up tools. The do-it-yourself trend that caught on during the height of the pandemic has lost steam, which pressured same-store sales. Lately, homeowners are hiring the pros to do what they were previously willing to do themselves.

Another trend that is emerging is consumers are jumping on the low interest rates in the economy and springing for larger homes. This has fueled spending on home appliances and decor, all of which benefits retailers like Lowe’s.

Glass Half Full

Investors were able to focus on Lowe’s improved sales outlook instead of the disappointing same-store sales results. The stock is up 10% and is trading back above the USD 200 level, which it has not seen since July 23. In fact, Lowe’s hasn’t seen its stock rise this much in over a year.

Home Depot Letdown

Lowe’s results came as a surprise to some investors, based on the social media response, considering that Home Depot’s quarter was a letdown. Similar to Lowe’s, Home Depot also reported weaker than expected U.S. same-store sales, which hasn’t happened since 2019. Fewer people ventured out to Home Depot in the quarter, despite higher ticket sales. Unlike Lowe’s, however, Home Depot was not able to turn the sentiment around on earnings day.

Investors punished Home Depot’s stock on Tuesday, sending shares lower by more than 4% and pressuring the Dow Jones Industrial Average. By Wednesday, Home Depot’s stock was in recovery mode, perhaps riding on the coattails of Lowe’s, and recouped 1.5% of its declines.

With the threat of the delta variant and a less dovish Fed, however, it remains to be seen how consumers will behave for the rest of the year.

Lowe’s Earnings to Rise in Q2, Revenue Could Disappoint

Home improvement retailer Lowe’s is forecast to report earnings per share of $3.97, which represents an increase of about 6% over the previous year, up from $3.75 per share.

However, the company that distributes building materials and supplies through stores in the United States would see a revenue decline of about 2% to $26.87 billion. During the full year, Zacks Research estimates the company will earn $10.82 per share and generate $91.63 billion in revenue, which would be up +22.12% and +2.26%, respectively, from the prior year.

Lowe’s shares have gained over 20% so far this year. The stock closed 0.48% lower at $192.69 on Friday.

Analyst Comments

“Shares of Lowe’s have risen and outpaced the industry in the past six months. The company remains well-positioned to capitalize the demand in the home improvement market backed by investments in technology, merchandise category and strength in Pro business. Notably, Lowe’s posted sturdy first quarter fiscal 2021 results, wherein the top and bottom lines beat the Zacks Consensus Estimate and grew year-over-year,” noted analysts at ZACKS Research.

“Results benefited from the strong execution of strategies to meet the broad-based demand. Also, its new total home strategy that includes providing complete solutions for various types of home repair and improvement needs bodes well. The strategy is an extension of the company’s retail-fundamentals approach. Going forward, management is committed toward expanding market share and boosting operating margin expansion.”

Lowe’s Stock Price Forecast

Eighteen analysts who offered stock ratings for Lowe’s in the last three months forecast the average price in 12 months of $230.47 with a high forecast of $250.00 and a low forecast of $205.00.

The average price target represents a 19.61% change from the last price of $192.69. From those 18 analysts, 14 rated “Buy”, four rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the stock price forecast of $230 with a high of $293 under a bull scenario and $125 under the worst-case scenario. The firm gave an “Overweight” rating on home improvement retailer’s stock.

“We view Lowe’s (LOW) favourably given its longer-term transformation opportunity and structural industry tailwinds, with substantial near-term uplifts from COVID-19 spending shifts that likely translate to longer-term sales retention,” noted Simeon Gutman, equity analyst at Morgan Stanley.

“Assuming a healthy underlying housing backdrop, we think comps can accelerate longer-term from stronger sales/sq ft trends, driven by e-comm accelerating, better in-stocks, product refreshes/exclusive launches, greater traction with Pro initiatives, and removing friction from the customer shopping experience.”

Several other analysts have also updated their stock outlook. In May, CFRA raised the target price to $220. Credit Suisse lifted the price objective to $205 from $188. JPMorgan lowered the stock price forecast to $214 from $219.

Check out FX Empire’s earnings calendar

Best ETFs For June 2021

A portfolio of outlier stocks can become chock full of monster gains for years to come, if chosen wisely.

But wouldn’t it be great if there was already a collection of outliers we could buy without even having to think about it?

Well maybe there is a way to do just that… through outlier ETFs.

So, here I’m going to give you the best ETFs that big money is getting involved in this month.

First thing’s first: to find them, I looked at all the ETFs making Big Money signals. I did that by heading over to MAPsignals.com and then looked at the Big Money ETF Buys and Sells chart. I looked at days with the biggest buying, circled here:

Once I had all the ETFs, I wanted to know which were the best potential opportunities. ETFs are baskets of stocks. And because MAPsignals scores over 6,000 stocks every day, as long as I know which stocks make up the ETFs, I can rank them all.

Here are the 5 best ETFs with scores: The Composite score, Technical score, and Fundamental score. These were computed by accounting for each components stock’s score and its associated weighting in the ETF. (keep in mind that weightings will change from time to time)

Below we see each ETF, their recent Big Money activity, and their scores. XLF, ITB, and XLC are top ranked ETFs. That makes sense because financials, home builders, and communications stocks have been leading the market much of this year so far.

IGV and ARKG, however, rank low on our list of ETFs. But there is opportunity here because the low scores are due to weak technicals. Big Money has been selling these ETFs, largely because they are heavily concentrated in growth stocks. But these stocks have excellent fundamentals: growing sales and earnings and big profits. These weak ETFs represent great potential bargains.

Let’s quickly look at the year-to-date performance of these 5 ETFs:

  • XLF +29.3%
  • ITB +29.2%
  • XLC +13.5%
  • IGV -4.0%
  • ARKG -18.1%

Now let’s quickly look at Big Money buying in the ETFs. Each chart below has many green bars which represents unusually large buying. The few red bars represent unusually large selling. What jumps out is the huge buying in all the ETFs.

Only with IGV and ARKG, there was recent selling too. But again, selling on ETFs and stocks with great fundamentals represents a value opportunity.

Source: www.mapsignals.com, End of day data sourced from Tiingo.com

Here’s why I like these ETFs: they are highly concentrated with fundamentally superior stocks. Below we see a table of three stocks in each ETF. They are some of the highest weightings in each.

Notice their fundamental scores are very strong on a scale from 0-100. This means strong growing sales, earnings, and profits over one and three years. This is how MAPsignals boils down all its fundamental research into one elegant score.

Now with XLF, ITB, and XLC – we see the stocks also have strong technical scores. That means Big Money has been pouring into them, lifting them to new highs. They are buoyant with Big Money support. But in IGV and AKG, we see weak technical scores. This means Big Money has been exiting the stocks.

But before you get spooked, let’s keep the recent environment in mind: Growth has fallen out of favor while value and reopen stocks have become all the rage. But it’s essential to remember these growth companies create phenomenal products and services enhancing our lives. I don’t foresee that stopping in the future. The recent selling is temporary and thematic.

What really drives this home is looking at how long-term Big Money buying can lead to monstrous gains. Below are charts showing all the instances these stocks were Top stocks in our research since 2015: our weekly report of outliers. We don’t need to go into details on each chart.

I’d like you to notice a few things:

  • When Big Money buying pours in, stocks go up
  • Repeated outliers, especially for years often means outsized gains

Owning outlier stocks is the way I try to beat markets. Easy exposure to many stocks can be achieved by buying ETFs. But just like anything, you must be in the 1% if you want to be in the 1%.

We can find outlier ETFs by tracking the Big Money. But that alone isn’t enough: when we catalog the components and find outlier stocks underneath… that’s the winning recipe.

So, there you have it: the 5 best ETFs that Big Money has been trafficking in recently. Outlier ETFs hold outlier stocks. Finding them is the key to finding potentially outlier gains.

Now let’s look at what those look like:

Source: www.mapsignals.com, End of day data sourced from Tiingo.com

The Bottom Line

XLF, ITB, XLC, IGV, & ARKG represent top ETFs for June 2021. Financials, homebuilders, & Communications stocks have performed well lately, which should continue. Software and Genomics companies have reached interesting levels, too. Paying attention to the fundamental quality of ETF constituents is paramount.

To learn more about MAPsignals’ Big Money process please visit: www.mapsignals.com

Disclosure: the author holds long positions GOOGL, CRM, & REGN in managed accounts, but no positions in XLF, ITB, XLC, IGV, ARKG, BLK, SCHW, SPGI, DHI, LEN, LOW, FB, ATVI, ADBE, MSFT, TDOC, & VRTX at the time of publication.

Investment Research Disclaimer

Home Depot Trading Higher After Beating Estimates

Dow component Home Depot Inc. (HD) is trading higher by more than 2% in Tuesday’s pre-market after beating Q1 2021 top and bottom line estimates by healthy margins. The home improvement giant earned $3.86 per-share during the quarter, $0.93 better than estimates, while revenue rose a healthy 32.7% year-over-year to $37.5 billion, nearly $5 billion higher than consensus. Comparative sales grew 31% worldwide, with 29% growth in the United States.

Home Buying Boom

The company has benefited from intense pandemic tailwinds, with locked-down and socially-distanced customers using the crisis to engage in home improvement projects. While that catalyst is winding down at a rapid pace, COVID also triggered a major geographical shift at the same time that remote-working millennials are marrying and building their nests, underpinning a massive home building and buying spree that should last for several years, at a minimum.

Despite Home Depot’s stellar report, bullish sentiment could offer a better opportunity for rival Lowes Corp. (LOW), who reports Q1 earnings in Tuesday’s pre-market. Oppenheimer analyst Brian Negal embraced this strategy last week. noting this “more upbeat call on Lowe’s is largely tactical in nature and hinged upon prospects for a continued flow of funds into more cyclically focused equities and now historically discounted valuation versus that of Home Depot.”

Wall Street and Technical Outlook

Wall Street consensus on Home Depot now stands at an ‘Overweight’ rating based upon 21 ‘Buy’, 3 ‘Overweight’, 10 ‘Hold’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $280 to a Street-high $377 while the stock is set to open Tuesday’s session about $24 below the median $350 target. A trip back up last week’s all-time high at $345.69 looks likely with this configuration but a breakout might not be in the cards.

Home Depot sold off from a 2020 high at 247 to a three-year low near 140 during the first quarter of 2020 and turned sharply higher, returning to the prior high in May. A June breakout stalled just below 300 in August while a March 2021 buying surge above that peak posted an all-time high last week.  A weekly Stochastic sell cycle makes a breakout unlikely in the second quarter but the long-term uptrend should eventually resume control of the ticker tape.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Best Dividend Stocks May 2021

The hallmark way I go about finding the best dividend stocks…the outliers, is by looking for quiet Big Money trading activity. Oftentimes, that can be institutional activity. I’ll go over why following the Big Money is so important in a bit. But, the 5 stocks I see as long-term dividend growth candidates are AAPL, BLK, LOW, AVGO, & GRMN.

Over decades, I’ve learned that the true tell on great stocks is that big money consistently finds its way into the best companies out there… especially dividend paying stocks. Some of the biggest returns ever have come from holding stocks for many years and reinvesting dividends.

I want the odds on my side when looking for the highest quality dividend stocks…and I own many of them.

So, let’s get into it.

Up first is Apple, Inc. (AAPL), which happens to be the largest company on planet earth. They are a technology firm with popular products like iPhones, iPads, & iTunes.

Let’s first start with the technical picture.

When deciding on a strong candidate for long-term dividend growth, I like to look for stocks seeing upward momentum:

  • 1 month performance (+10.98%)
  • Historical Big Money buy signals

Below are the Big Money signals Apple has made since 2017. Green bars are showing that AAPL was likely being bought by an institution according to MAPsignals. Typically, the more Big Money signals, the stronger the stock:

Chart, line chart Description automatically generated

Source: MAPsignals, End of day data sourced from Tiingo.com

On top of technicals, when deciding on the best dividend stock, you should look under the hood to see if the fundamental picture supports a long-term investment. As you can see, AAPL has a strong dividend history:

  • 3-year dividend growth rate (+9.8%)
  • Current dividend per share = .205
  • Forward yield = .61%
  • 3-year earnings growth rate (+13.26%)

Next up is BlackRock, Inc. (BLK), which is a leading asset manager company. They have a long dividend history and shares have been in an uptrend recently.

When deciding on a strong candidate for long-term dividend growth, it’s a good idea to look for many years of dividend increases.

Now let’s look at recent performance:

  • 1 month performance (+7.98%)
  • Historical big money signals

Below are the big money signals that BlackRock has made since 2017. It’s clear the stock has seen green recently.

Chart, line chart Description automatically generated

Source: MAPsignals, End of day data sourced from Tiingo.com

On top of technicals, when deciding on the best dividend stock, you should look under the hood to see if the fundamental picture supports a long-term investment. As you can see, BlackRock has a nice dividend history. Their earnings growth has been stellar as well:

  • 3-year dividend growth rate (+13.2%)
  • Current dividend per share = 4.13
  • Forward yield = 2.03%
  • 3-year earnings growth rate (+2.14%)

Next, I’m looking at Lowes Companies Inc. (LOW), which is a leading home improvements chain. They have a solid dividend history.

When deciding on a strong candidate for long-term dividend growth, recent performance in the shares is important:

  • 1 month performance (+5.92%)
  • Recent Big Money signals

Below are the big money signals that Lowe’s has made since 2017. It’s clear the stock has been in a nice uptrend:

Chart, line chart Description automatically generated

Source: MAPsignals, End of day data sourced from Tiingo.com

On top of technicals, when deciding on the best dividend stock, you should look under the hood to see if the fundamental picture supports a long-term investment. As you can see, LOW has a strong dividend history:

  • 3-year dividend growth rate (+13.3%)
  • Current dividend per share = .60
  • Forward yield = 1.19%
  • 3-year earnings growth rate (+34.66%)

Next, I’m looking at Broadcom, Inc. (AVGO), which is a leading semiconductor company. The shares have been on a tear this year.

When deciding on a strong candidate for long-term dividend growth, recent muted performance is not a bad thing:

  • 1 month performance (-.16%)
  • Recent Big Money signals

Below are the Big Money signals that Broadcom has made since 2017.

Chart Description automatically generated

Source: MAPsignals, End of day data sourced from Tiingo.com

On top of technicals, when deciding on the best dividend stock, let’s check up on the fundamentals. As you can see, Broadcom has a strong dividend history.

  • 3-year dividend growth rate (+47.2%)
  • Current dividend per share = 3.60
  • Forward yield = 3.09%
  • 3-year earnings growth rate (+174.18%)

Lastly, I’m looking at Garmin Ltd. (GRMN), which is a leading navigational company.

When deciding on a strong candidate for long-term dividend growth, I like to look for recent leaders:

  • 1 month performance (+8.99%)
  • Historical Big Money signals

Below are the Big Money signals that Garmin has made since 2017.

Chart, histogram Description automatically generated

Source: MAPsignals, End of day data sourced from Tiingo.com

On top of technicals, when deciding on the best dividend stock, you gotta see if the fundamental picture supports a long-term investment. Garmin has been a steady grower:

  • 3-year dividend growth rate (+5.6%)
  • Current dividend per share = .67
  • Forward yield = 1.9%
  • 3-year earnings growth rate (+13.09%)

The Bottom Line

AAPL, BLK, LOW, AVGO, & GRMN represent solid dividend choices. Given the strong historical dividend growth and Big Money signals, these stocks could be worth an extra look for a dividend investor.

Disclosure: the author holds long positions in personal and managed accounts in GRMN. He doesn’t hold positions in AAPL, BLK, LOW, & AVGO at the time of publication.

To learn more about the MAPsignals process, click here.

Disclaimer

 

Now It’s All About Guidance; Lowe’s Shares Slump Despite Topping Estimates

Lowe’s Companies Inc, a home improvement retailer, reported better-than-expected earnings in the fourth quarter, but shares slumped over 4% as the Mooresville, North Carolina-based company reiterated the scenario guidance given at their December Analyst Day.

The home improvement retailer reported net earnings of $978 million and diluted earnings per share of $1.32 for the quarter ended January 29, 2021 compared to net earnings of $509 million and diluted EPS of $0.66 in the fourth quarter of 2019.  The fourth-quarter adjusted diluted EPS increased by 41.5% to $1.33, beating the Wall Street consensus estimates of $1.20 per share.

The company that distributes building materials and supplies through stores in the United States said its total sales for the fourth quarter were $20.3 billion compared to $16.0 billion in the fourth quarter of 2019, and comparable sales increased 28.1%.  Comparable sales for the U.S. home improvement business increased by 28.6% for the fourth quarter.

“Against very tough expectations, we think Lowe’s (LOW) results hit the bar, without clearing it by much. The comps were just about where they needed to be and the margins do look a bit better than Home Depot’s yesterday, which resulted in an EPS beat,” said Michael Baker, senior research analyst at D.A. Davidson.

“The guidance from the December analyst day was reiterated, which means forward numbers won’t change much. We continue to prefer LOW on more long-term margin potential and a lower valuation, with the offset being tougher comparisons post-pandemic due to their overexposure to outdoor and DIY relative to HD. Both of course are seeing strong momentum, including into February.”

The company reiterated its 2021 outlook that sales of between down 2% and down 7% from the “robust” through the “weak” scenarios.

Lowe’s shares, which surged 34% in 2020, slumped over 4% to $161.80 on Wednesday.

Executive Comments

“Strong execution enabled us to meet broad-based demand driven by the continued consumer focus on the home, with growth over 16% in all merchandising departments, over 19% across all U.S. regions and 121% on Lowes.com.  I would like to thank our front-line associates for their continued dedication to serving our customers and communities and supporting safety in our stores,” commented Marvin R. Ellison, Lowe’s president and CEO.

“I am pleased with our progress in 2020 as we generated nearly $90 billion in sales, with annual sales growth of over $17 billion, while also enhancing our operating efficiency.  Looking ahead to 2021, we expect to grow market share and drive further operating margin expansion.”

Lowe’s Stock Price Forecast

Fourteen analysts who offered stock ratings for Lowe’s in the last three months forecast the average price in 12 months of $197.08 with a high forecast of $212.00 and a low forecast of $170.00.

The average price target represents a 21.72% increase from the last price of $161.91. From those 14 analysts, 11 rated “Buy”, three rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $210 with a high of $270 under a bull scenario and $110 under the worst-case scenario. The firm gave an “Overweight” rating on the home improvement retailer’s stock.

“Q4 fine, though flow through could have been better. Still, results check the box for what’s priced in. Achieving the ’21 robust case key for the stock,” said Simeon Gutman, equity analyst at Morgan Stanley.

Several other analysts have also updated their stock outlook. Wells Fargo raised the price target to $200 from $190. Oppenheimer upped the stock price forecast to $200 from $180.

Moreover, D.A. Davidson increased the target price to $192 from $185. Baird raised the target price to $200 from $190. At last, RBC upped the stock price forecast to $190 from $181.

Analyst Comments

“We view Lowe’s (LOW) favourably given its longer-term transformation opportunity and structural industry tailwinds, with substantial near-term uplifts from COVID-19 spending shifts that likely translate to longer-term sales retention,” Morgan Stanley’s Gutman.

“Assuming a healthy underlying housing backdrop, we think comps can accelerate longer-term from stronger sales/sq ft trends, driven by e-comm accelerating, better in-stocks, product refreshes/exclusive launches, greater traction with Pro initiatives, and removing friction from the customer shopping experience.”

Upside and Downside Risks

Risks to Upside: 1) Housing market remains strong, driving an acceleration in comps. Margin initiatives gain momentum, driving achievement of 12% EBIT margin target (9.1% in 2019) faster than expected – highlighted by Morgan Stanley.

Risks to Downside: 1) Slowing housing market & deterioration in the competitive landscape. 2) Execution missteps cause flow through to be weaker than expected. 3) Gross margin stagnation/contraction as it nears peak levels.

Check out FX Empire’s earnings calendar

U.S. Market Wrap and Forecast for Tuesday

Weak price action targeted big tech stocks on Monday, dropping Nasdaq-100 to a three-week low. SP-500 posted smaller losses while the Russell-2000 retraced Friday’s trading range, with the outperformance consistent with positive seasonality.  The WTI crude oil contract surged above 61 after Brazil’s strongman installed an army general to run Petróleo Brasileiro S.A. (PBR), one of the world’s largest oil and gas multinationals. That stock fell more than 20%.

Tesla Breaks Down

Tesla Inc. (TSLA) broke support near 780, completed a double top breakdown, and closed below the 50-day EMA for the first time since November. Dow component Apple Inc. (AAPL) fell nearly 3%, dropping into negative 2021 returns. Boeing Co. (BA) initially shook off the 777 grounding, squeezing short sellers after dropping more than 9%, but still closed in the red. Royal Caribbean Group (RCL) acted like a momentum play despite a billion dollar loss, surging to a 52-week high.

Gold had a strong session while Bitcoin faltered, lifting the yellow metal to the highest high in a week. Bonds slumped at 11-month lows while the 10-year Treasury note lifted above 1.3%, renewing anxiety about surging inflation. Kohl’s Corp. (KSS) rose over 6% as activist shareholders tried to take over the boardroom, just ahead of department store earnings that should confirm miserable conditions in America’s shopping malls.

Homebuilders on Tap

Tuesday’s Home Depot Inc. (HD) earnings will set the tone for mega-caps, with the housing boom likely to translate into a strong quarter. NVIDIA Inc. (NVDA) volatility is surging ahead of its Q4 release later this week. Bears could have the final say, given sell-the-news reactions after other chip reports in the last month. Square Inc. (SQ) could also generate fireworks after its report, with the stock glued to an all-time high after massive upside in the last 11-months

Home Depot will provide just one metric in a week chock-full of housing catalysts.  Home price data will also be released in Tuesday’s pre-market, followed by mortgage applications, January new home sales, and Lowe’s Cos. Inc. (LOW) earnings on Wednesday. Existing home sales wraps up the data flood, telling market players to keep close watch on SPDR S&P Homebuilder’s ETF (XHB), which is trading at an all-time high.

For a look at all of this week’s economic events, check out our economic calendar.

Three Top Earnings Plays This Week

Major indices sold off this week one year ago when a Kirkland, Washington nursing home reported the first non-travel related COVID cases in the United States. The rest is history, with major benchmarks crashing to multiyear lows, ahead of a relentless recovery underpinned by massive government stimulus programs. Those greenbacks continue to guide price action in 2021, with banks and recovery plays outperforming while pandemic beneficiaries falter.

The next act of this real-life soap opera comes in Monday’s pre-market, when Royal Caribbean Group (RCL) is likely to report another quarter of staggering losses.   Dow component Home Depot Inc. (HD) heads the week’s blue chip earnings schedule on Tuesday while rival Lowe’s Cos. Inc. (LOW) follows on Wednesday. Hot rocket NVIDIA Inc. (NVDA) also reports mid-week, with investors confident the stock will trade above 1,000 in coming years.

Royal Caribbean

Royal Caribbean is expected to report a Q4 2020 loss of $4.99 per-share after posting a $1.42 profit in the same quarter last year. That was also the last quarter the cruise operator made money or had a full fleet sailing around the world. RCL has gone to the capital markets several times since then, attempt to stay afloat, which takes on special meaning in this case. As with other battered leisure segments, the company is counting on vaccines to get them back in business.

Home Depot

Wall Street analysts are looking for Home Depot to earn $2.37 per share on $27.1 billion in Q4 2020 revenue. The stock cleared February 2020 resistance in May and posted an all-time high at 292.95 in August. It failed an October breakout attempt and has traded in a narrow range since that time, working off 2020’s outsized share gains. With the pandemic receding, the retailer could trade higher on a booming housing market and the strengthening U.S. economic outlook.

NVIDIA

NVIDIA is expected to report another strong quarter on Wednesday, with analysts predicting a Q4 2020 profit of $1.98 per-share on $4.82 billion in revenue. The stock just nosed above the September peak at 589.07 but a breakout will require a buy-the-news reaction after the report. That isn’t a sure thing after Advanced Micro Devices Inc. (AMD), the other beneficiary of Intel Corp. (INTC) missteps, sold off in January despite beating top and bottom line estimates.

For a look at all of this week’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

U.S. Market Wrap and Forecast for Monday

Early buying pressure faded during Friday’s expiration session, dropping major indices into the red. WTI crude oil reversed, dropping below 60 as temperatures lifted above the freezing mark in Texas and southern states. The 30-year bond posted another monthly low, continuing the relentless rise in yields across short- and long-dated instruments. Gamestop Inc. (GME) hit a monthly low, forcing another batch of Reddit traders to look for a less stressful hobby.

Roku Rocks

Roku Inc. (ROKU) posted a Q4 2020 profit of $0.49 per-share, well above expectations for a $0.03 loss, lifting the streaming hardware provider to a three-day high. However, rich valuation weighed on buying interest, stalling price well below Tuesday’s all-time high at 486.72. Deere and Co. (DE) reported the second blowout quarter in a row, lifting the agricultural giant to an all-time high above 330. The stock rose more than 55% in 2020 and has added another 20% so far in 2021.

Russell-2000 index ignored blue chip selling pressure, lifting into the midpoint of the weekly trading range. This instrument has rallied 55% since September, carving one of the strongest small cap buying waves since the 1990s. Speculative fervor in the Reddit crowd is driving the upside, with SPACs acting as petri dishes for hundreds of start-up operations. Unfortunately, most small caps won’t succeed down the road due to roadblocks set up by trillion dollar mega-techs.

Post-Options Hangover Ahead

Discovery Inc. (DISCA) could provide early metrics on the paid streaming service it launched in January in Monday’s pre-market earnings release. Home Depot Inc. (HD) and Lowes Inc. (LOW) lead next week’s blue chip calendar, highlighting do-it-yourself income during the pandemic’s second wave. The bubble in mall anchors could break after department stores release miserable quarterly results, which should confirm the slow bleed of long-term customers.

Consumer confidence and durable goods head next week’s economic calendar, along with new home sales. Millennials have entered their nesting stages, scooping up the limited supply of existing homes and driving prices to all-time highs. The supply crunch is forcing many nest builders to take advantage of remote work opportunities and build homes far away from west coast and northeast urban centers, in a phenomenon that will alter US demographics for decades.

For a look at all of today’s economic events, check out our economic calendar.

Lowe’s Forecasts Q4 Sales to Grow 15-20%; Buy with Target Price $190

Lowe’s Companies Inc forecasts total and comparable sales growth of 15% to 20% in the fourth quarter, but higher investment in COVID-19-related support for its associates, store safety and community pandemic relief will likely weigh on earnings.

The home improvement retailer reported net earnings of $692 million and diluted earnings per share of $0.91 for the quarter ended October 30, 2020. Excluding charges, third-quarter adjusted diluted EPS increased 40% to $1.98 from adjusted diluted EPS of $1.41 in the third quarter of 2019, a tad higher than the market expectations of $1.97 per share.

“The EPS was only slightly above consensus as expenses were higher than we modelled. The guidance was mixed. Thus, with the stock up 33.5% year-to-date, we expect a bit of a give-back today even with the stock at relative discount of 19.3x consensus forward estimate compared to HD at 22.7x, the S&P 500 at 23.0x and our group average of 21.5x,” said Michael Baker, MD and Senior Research Analyst at D.A. Davidson & Company.

Lowe’s said its sales rose to $22.3 billion in the third quarter, up from $17.4 billion in the same period a year ago, and comparable sales climbed over 30%.  Comparable sales for the U.S. home improvement business also jumped more than 30% for the third quarter.

The company that distributes building materials and supplies through stores in the United States said it invested $245 million in COVID-related support of frontline hourly associates, bringing its total COVID-related associate financial support to more than $800 million this year.

With the extra sending, Lowe’s forecasts diluted earnings per share and adjusted diluted earnings per share between $1.10 – $1.20 per share, compared with Wall Street estimates of $1.17 per share. For fiscal 2020, the company expects capital expenditures of about $1.7 billion.

“Shares are off as investors look past 30% comps and a robust 4Q sales guide and focus on 2H margins below Street expectations. Lowe’s has stood apart from peers in ’20 given its ability to fulfil record demand, but also now for its bold decision to pull forward investments (while competitors delay). This weighs on margins near-term, though we have no doubt these actions will amplify share gains ahead. Reiterate Buy,” said Jonathan Matuszewski, equity analyst at Jefferies, who gave a price target of $202.

At the time of writing, Lowe’s shares traded 5.83% lower at $150.54 on Wednesday. However, the stock is up over 25% so far this year.

Executive Comments

“Strong execution enabled us to meet continued broad-based demand, as we delivered over 15% growth in all merchandising departments, over 20% growth across all geographic regions. and triple-digit growth online.  We continued to invest in the future growth of the company, including a $100 million investment in the quarter as part of an ongoing effort to reset the layout of our U.S. stores, making them easier to shop with improved product adjacencies, especially for Pro customers,” said Marvin R. Ellison, Lowe’s president and CEO.

“Our omni-channel transformation continued in the third quarter with further investments in Lowes.com and our supply chain.   I remain confident that we are making the right strategic investments to deliver sustainable, long-term growth.  I would also like to thank our outstanding frontline associates for their unwavering commitment to customer service and safety,” R. Ellison added.

Lowe’s Stock Price Forecast

Nineteen equity analysts forecast the average price in 12 months at $193.11 with a high forecast of $315.00 and a low forecast of $159.00. The average price target represents a 28.16% increase from the last price of $150.68. From those 19 analysts, 16 rated “Buy”, three rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $190 with a high of $260 under a bull-case scenario and $110 under the worst-case scenario. The firm currently has an “Overweight” rating on the home improvement retailer’s stock. Lowe’s Companies had its target price increased by Telsey Advisory Group to $190 from $185. The firm currently has an outperform rating on the home improvement retailer’s stock.

Several other analysts have also recently commented on the stock. Zacks Investment Research raised shares of Lowe’s Companies from a hold rating to a strong-buy rating and set a $187 price objective. BNP Paribas initiated coverage on shares of Lowe’s Companies and set a neutral rating and a $159 price objective. Barclays upped their target price on shares of Lowe’s Companies to $180 from $150 and gave the company an overweight rating in August. On the other hand, ValuEngine lowered shares of Lowe’s Companies from a hold rating to a sell rating last week.

We think it is good to buy at the current level and target $190 as 50-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

Analyst Comments

“We view Lowe’s favourably given its longer-term transformation opportunity and structural industry tailwinds, with substantial near-term uplifts from COVID-19 spending shifts that likely translate to longer-term sales retention,” said Simeon Gutman, equity analyst at Morgan Stanley.

“Assuming a healthy underlying housing backdrop, we think comps can accelerate longer-term from stronger sales/sq ft trends, driven by e-comm accelerating, better in-stocks, product refreshes/exclusive launches, greater traction with Pro initiatives, and removing friction from the customer shopping experience,” Gutman added.

Upside and Downside Risks

Risks to Upside: 1) Housing market remains strong, driving an acceleration in comps. 2) Margin initiatives gain momentum, driving achievement of 12% EBIT margin target (9.1% in 2019) faster than expected – highlighted by Morgan Stanley.

Risks to Downside: 1) Slowing housing market & deterioration in the competitive landscape. 2) Execution missteps cause flow through to be weaker than expected. 3) Gross margin stagnation/contraction as it nears peak levels.

Check out FX Empire’s earnings calendar