Wide-Moat Lowe’s Business Update Corroborates our Long-Term Financial Outlook; Shares Fairly Valued

Wide-moat Lowe’s offered a peek into its near- and long-term prognosis for the business at its Dec. 7 investor day that were largely in line with our existing forecasts. While 2023 is slated to see a sales decline to $90 billion from $97 billion in 2022 (in a moderate market condition), this downtick includes the divestiture of the $6 billion revenue Canadian business. We plan to nudge our $96 billion 2023 sales forecast lower, but near Lowe’s robust market scenario outlook ($92 billion) given a solid opportunity set. From a profitability perspective, our existing 2023 outlook incorporated a 13.6% operating margin, which is at the midpoint of Lowe’s 13.3%-13.9% guidance. Longer term, we see no reason to adjust our forecast, and as such, we don’t plan any material change to our $218 fair value estimate and view shares as fairly valued.