Lowe’s Stock Eyes New Highs as Growth, Dividends Drive Gains

Key Points

• Home improvement retailers Lowe's Companies and Home Depot turned a corner in 2024, reverting to comp store growth. 
• The sign of organic strength is expected to continue in 2025, sustaining operational efficiencies and cash flow. 
• Cash flow is used for substantial capital return programs that aggressively reduce share counts while paying dividends. 

Home improvement retailers Lowe’s NYSE: LOW and Home Depot NYSE: HD turned a corner, and their Q4 2024 earnings reports confirmed it. The corner is a return to comparable store growth. This is critical because it is the first quarter in over a year with positive comp store growth, a signal of end-market strength and operational efficiencies.

The takeaway for investors is that organic growth is expected to continue in 2025, compounded by increased store counts, sustaining the outlook for improving shareholder value and capital returns, the underpinning forces driving their stock price action. 

Lowe’s Returns to Comp Store Growth, Guides for Steady 2025

Lowe’s Q4 results and guidance for 2025 aren’t robust but include a return to comp store growth, the first time in six quarters, and better-than-expected revenue.

The company’s net revenue of $18.55 billion is down 0.3% compared to the prior year, but it is $0.26 billion or 140 basis points better than the analyst consensus reported by MarketBeat. Strength was seen in the Pro and online channels, the holiday season, and rebuilding efforts only partially offset by subdued DIY discretionary items. 

Margin is a crucial detail. The company experienced gross margin pressure but offset it with operational improvements and improved store leverage, leading to an 80 basis-point improvement in the operating margin and a 58-point improvement in the net.

The bottom-line results include the impact of one-offs and share repurchases, rising by $0.15 or 840 bps annually, but even with adjustment, outperformed by a solid 500 bps margin. Earning strength is crucial because it provides strong cash flow sufficient to reduce debt while paying dividends and buying back shares. 

The guidance aligns with Home Depot’s in that growth is forecasted, including comp-store growth, but less than predicted by analysts. The news caused a quick reset in the HD market that turned into a buying opportunity because of the cash flow and capital return outlook: Lowe’s stock market followed HD’s lead and simply moved higher on the results, confirming support at a critical level and an uptrend which began for the home improvement retailers in 2023. 

Lowe’s Home Improvement Is Building Value for Investors

Lowe’s is building value with its balance sheet and capital return program.

The balance sheet carries a persistent deficit, but this is due to aggressive share repurchases in prior years, which increased its debt but reduced its share count by double digits. 

The activity in 2024 includes a reduced pace of buybacks that allowed for significant debt reduction while reducing the share count by 2.7% for the year.

Other details include increased cash, inventory, long-term investments, and total assets and long-term debt falling below 0.75x assets.

Regarding the dividend, it is safe and reliable at under 40% earnings and is expected to grow annually for the foreseeable future. 

Analysts Forecast New Highs for Lowe’s Stock in 2025

The analysts' trends leading into Lowe’s Q4 results were bullish and remain unchanged in their wake. The first revision tracked by MarketBeat is a reiterated Outperform from Telsey Advisory Group with an above-consensus $305 price target. The consensus price target is closer to $282, about 17% above the critical support target, with revisions and trends leading to the high-end range. That is above $300, another 7% to 10% upside that could be reached in 2025. 

The technical action is favorable, with the market rising by 3.5% in premarket trading. The move confirms support at a critical level, aligning with an uptrend. The move will likely continue higher in the near term because the MACD and stochastic are set up for a bullish swing.

The question is if Lowe’s stock can get above the $261 and $280 levels, which seems likely because of the capital return and analysts' trends. Institutional activity is another factor pointing to new stock price highs, with buying ramping to a multi-year high ahead of the release and outpacing selling volume by 1.5 to 1.