Lowe’s Builds Value for Investors: Still a Good Buy in 2025
Lowe’s (NYSE: LOW) FQ2 2026 earnings report proves that it is still a good buy, capable of providing value for investors through capital return and equity gains. The highlights include a beat-and-raise quarter, improved profitability, and new acquisitions that expand its exposure to the Pro market while deepening penetration into the new home market.
The takeaway is that this company is growing despite the macroeconomic headwinds and has the financial clout to position itself for the future. The future includes an eventual rebound in the housing market that will consist of existing and new markets driven by demand in DIY and Pro markets.
The supply-demand imbalance in housing is well-known. Demand has outstripped supply for over a decade, underpinning the persistent increase in home prices. While housing markets remain stuck in 2025, the FOMC is on track to begin reducing interest rates this year.
The caveat is that interest rates are unlikely to fall quickly, and the recovery will take some time to build momentum. The best-case scenario is that housing markets will begin accelerating early-mid-2025; the worst-case scenario is that there is a recession before then.
Lowe’s Capital Return and Balance Sheet Are Recession-Proof
Lowe’s is not exactly a recession-resistant stock, but it has qualities that make it a buy-and-hold stock regardless of economic conditions. Among them are the balance sheet and dividend, which annualize to approximately 1.9% as of mid-August.
A dividend by itself isn’t enough to make it a buy, and the almost-2% yield doesn’t mitigate risk; however, the fact that this company is a Dividend Aristocrat and Dividend King with over 60 years of annual distribution increases to its credit does.
This company has weathered numerous recessions and economic downturns, including the 2008 Housing Bubble and ensuing Global Financial Crisis, and paid its dividend the entire time. The company also engages in share repurchases, reducing the count significantly over time, which underpins the upward trajectory in the share price action.
The company didn’t repurchase any shares in FQ2, choosing instead to invest in new businesses. Still, activity in the preceding 12 months resulted in a 1.5% year-over-year (YOY) reduction in shares, and buybacks will likely be resumed.
The critical detail is that Lowe’s reduced its count by more than 25% in the last five years and 45% in the previous ten, and will likely continue to be robust over time.
Lowe’s balance sheet is as healthy as it has ever been. The company continues to run a deficit due to the robust share repurchases, but is in a healthy position to continue investing in shareholder value.
The Q2 highlights include increased cash, current, and total assets offset by a reduction in long-term debt and total liabilities. The net result was a 17% reduction in the deficit and declining net leverage.
Lowe’s Guides for Growth: Analysts Forecast That Lowe’s Growth Will Accelerate
The guidance for the remainder of the year is good, certainly better than feared, but it may lead to stock price volatility this fall. The company issued an outlook for revenue that was better than expected, offset by an expectation for slightly narrower margins.
The bottom line is that the forecast for adjusted EPS was unchanged, expecting $12.20 at the low end compared to the $12.25 forecasted by MarketBeat’s consensus estimate. That’s good for about 2% YOY growth, and the longer-term forecast is more robust.
Long-term estimates, which are likely to be increased due to the acquisitions, forecast revenue and earnings growth to accelerate to the high single-digits over the next few years and sustain a high single-digit pace for several years afterward.
Lowe’s price action reflects the strength of the results and outlook as well as the market risks. The stock price surged by several hundred basis points to cross a critical resistance point, only to fall back and confirm resistance.
Lowe’s price action may move higher from this level, but there are headwinds. It may also move lower in this scenario, pulling back within its trading range to firmer support levels, possibly as deep as the $220 level.
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