Lowe’s Companies, Inc. (NYSE:LOW) is positioning for growth in a flat home improvement market, leveraging recent acquisitions and an expanding Pro platform to capture underspent demand, while navigating weather- and rate-driven headwinds.
For a deeper analysis of the strategy, JP Morgan analyst Christopher Horvers hosted Marvin Ellison, the company’s chairman, president, and CEO, and key members of his Investor Relations team.
The analyst writes that the primary focus of the discussion was the balance between internal business improvements and economic factors, consumer health and a potential housing market inflection, and the large Pro strategy.
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Management View
Horvers says that the management described the consumer as “healthy,” citing positive wealth effects and income growth, with the expected “flat home improvement market” proceeding as anticipated.
Further, management emphasized that a true market inflection requires lower interest rates due to consumers delaying category spending.
Management also highlighted the company’s disproportionate exposure to big-ticket spending, even though 70% of business is DIY.
The analyst noted that the management expects replacement cycles to improve in 2026, leading to slightly better market growth and continued outperformance.
Management ties this inflection to further rate cuts, which are needed to boost housing turnover or release $50 billion in pent-up demand from rate-locked homeowners catching up on deferred spending.
Analyst View
The analyst says that his outlook is more optimistic and doesn’t depend on further mortgage rate declines.
Horvers expects current rates to be enough to drive 3% growth in Existing Home Sales (EHS) in 2026, which, along with better replacement cycles, tax stimulus, and slight inflation, should fully accelerate market growth next year.
The analyst does not foresee a remodeling cycle at current rates due to affordability issues and lack of home price appreciation, posing a relative risk for the company.
Further, the analyst says that the sector is managing challenging year-over-year comparisons, due to favorable weather last year and the impact of the late September/early October 2024 hurricanes (which added approximately 100 basis points to the third quarter, weighted toward the back half).
The analyst rated the stock Overweight.
Price Action: LOWE shares were trading higher by 0.69% to $245.76 at last check Wednesday.
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