Lowe’s Earnings: Weather and Macroenvironment Impair Sales, but Solid Execution on Display

We believe wide-moat Lowe’s better-than-expected fiscal 2023 first-quarter results highlighted the firm’s agile execution and its ability to mitigate sales deleverage and higher wage costs. Lowe’s net sales of $22.3 billion (down 5.5%) and adjusted EPS of $3.67 outpaced our preprint forecasts of $21.1 billion and $3.31, respectively. Nonetheless, we plan to reduce our $218 fair value estimate by a mid-single-digit rate after incorporating the tempered 2023 guidance due to a lower near-term outlook (now calling for net sales of $87 billion-$89 billion and adjusted EPS of $13.20-$13.60, from $88 billion-$90 billion and $13.60-$14.00, respectively). With a 2%-3% pop on the report, shares appear fully valued, trading near our intrinsic valuation.