$ AAPL

$ ABBV

$ ABNB

$ ACGL

$ ADI

$ ADM

$ ADP

$ ADSK

$ AEE

$ AEP

$ AES

$ AFL

$ AIG

$ AIZ

$ AJG

$ AKAM

$ ALB

$ ALGN

$ ALL

$ AMAT

$ AMCR

$ AMD

$ AME

$ AMGN

$ AMP

$ AMT

$ AMZN

$ ANET

$ AOS

$ APA

$ APD

$ APO

$ APTV

$ ARE

$ ATO

$ AVB

$ AWK

$ AXON

$ BA

$ BALL

$ BAX

$ BBY

$ BDX

$ BEN

$ BG

$ BIIB

$ BKNG

$ BLDR

$ BMY

$ BR

$ BRO

$ BXP

$ CAG

$ CAH

$ CARR

$ CAT

$ CBOE

$ CBRE

$ CCL

$ CDNS

$ CDW

$ CEG

$ CF

$ CHD

$ CHRW

$ CI

$ CINF

$ CL

$ CLX

$ CMCSA

$ CMG

$ CMI

$ CMS

$ COIN

$ COO

$ COP

$ COR

$ CPAY

$ CPT

$ CRL

$ CRWD

$ CSCO

$ CTRA

$ CTSH

$ CTVA

$ CVS

$ CVX

$ CZR

$ DAL

$ DASH

$ DAY

$ DD

$ DDOG

$ DE

$ DELL

$ DG

$ DGX

$ DIS

$ DOC

Lowe’s Q1 2026 delivered margin gains and strategic expansion, offsetting a slight revenue miss, with strong online sales and disciplined cost controls supporting long-term growth despite near-term cost and integration risks.

# Lowe’s Q1 2026: Margin Gains and Strategic Expansion Offset Revenue Miss

---

## Executive Summary

- **Lowe’s Companies (LOW) reported Q1 2026 results with revenue of $20.93B, narrowly missing consensus by $0.01B, but delivered an EPS of $2.92, beating expectations by $0.04.** The quarter was characterized by robust online sales growth (+7.5% YoY) and continued benefits from the Perpetual Productivity Improvement (PPI) program.
- **Gross margin improved by 37 basis points YoY,** reflecting effective cost controls and productivity initiatives, even as labor and input costs continued to rise, particularly in the pro segment.
- **Management struck a bullish yet measured tone,** highlighting strong seasonal recovery, disciplined capital allocation, and strategic expansion in the pro segment. Guidance for FY2026 was reaffirmed, with sales expected between $84.5B and $85.5B and adjusted EPS of $12.20–$12.45.
- **Key risks include persistent labor cost inflation, a flat home improvement market, and a temporary pause in share repurchases.** However, opportunities in digital sales, pro segment expansion, and margin improvement remain underappreciated by the market.
- **Catalyst watch:** Integration progress of ADG and FBM acquisitions, macro tailwinds from potential Fed rate cuts, and updates on the resumption of share repurchases.

---

## Performance Snapshot

| Metric         | Reported   | Consensus   | Surprise   | YoY Change      |
|----------------|------------|-------------|------------|-----------------|
| Revenue        | $20.93B    | $20.94B     | -$0.01B    | -               |
| EPS            | $2.92      | $2.88       | +$0.04     | -               |
| Online Sales   | +7.5% YoY  | -           | -          | +7.5%           |
| Gross Margin   | +37 bps YoY| -           | -          | +37 bps         |
| CapEx          | ~$2.5B (FY)| -           | -          | -               |

---

## Earnings Quality

Lowe’s Q1 2026 earnings quality was solid, with **gross margin expanding by 37 basis points YoY**—a testament to the effectiveness of the PPI program and disciplined cost management. The revenue mix benefited from **strong online sales growth (+7.5% YoY)** and contributions from recent acquisitions (ADG and FBM). However, the company continues to face **rising labor costs and input price pressures,** particularly in the pro segment, which could weigh on future profitability. The divergence between modest top-line growth and stronger margin performance highlights Lowe’s ability to drive earnings through operational efficiency rather than pure sales expansion.

---

## Management Commentary & Guidance

Management’s tone was **optimistic but pragmatic**, emphasizing a strong seasonal recovery and the success of productivity and cost control initiatives. The company reaffirmed its FY2026 guidance, projecting **sales of $84.5B–$85.5B and adjusted EPS of $12.20–$12.45**, with comparable sales expected to be flat to +1%. Strategic priorities include **expanding the pro segment, integrating recent acquisitions, and maintaining disciplined capital allocation**. Notably, share repurchases are paused until leverage targets post-acquisition are met, reflecting a cautious approach to balance sheet management.

---

## Key Risks

- **Labor cost inflation** and ongoing input price pressures, especially in the pro segment, could erode margin gains.
- **Flat home improvement market** conditions may limit top-line growth.
- **Paused share repurchase program** could dampen near-term shareholder returns.
- **Integration risks** from recent acquisitions (ADG and FBM) may create execution challenges.

---

## Expected Market Reaction

The market is likely to respond with **cautious optimism**. While the EPS beat and margin improvements are supportive, the revenue miss and pause in share repurchases may temper enthusiasm. Analysts and investors may focus on Lowe’s ability to sustain margin gains and deliver on integration and pro segment expansion targets.

---

## Final Takeaway

**Lowe’s Q1 2026 was a resilient quarter, marked by margin improvement and strategic progress despite a slight revenue miss.** The market may be underestimating the long-term benefits of the PPI program and digital sales growth, while overemphasizing near-term cost and integration risks. 

**Upcoming catalysts:** 
1. Progress updates on ADG and FBM integration.
2. Macro developments such as a potential Fed rate cut and its impact on housing and home improvement demand.

Lowe’s remains well-positioned for long-term value creation, provided it continues to execute on productivity and strategic growth initiatives.

Lowe’s (LOW) Margin Strength Offsets Revenue Miss

Lowe’s Q2 FY2025 outlook is supported by spring demand, Pro segment growth, and digital initiatives, with margin stability expected despite housing and weather risks.

# Lowe’s Companies, Inc.: Spring Demand, Pro Strength, and Digital Levers Set the Stage for Q2 FY2025

## Executive Summary: Cautious Optimism as Seasonal Tailwinds and Pro Segment Drive Q2 Upside

We hold a **Neutral-to-Bullish** outlook for Lowe’s Companies, Inc. heading into Q2 FY2025. The company is positioned for a **modest revenue acceleration**—with management guiding for a **US $400M spring demand shift** and continued **Pro segment expansion** (now 30% of sales). Q1 FY2025 saw **total revenue of $20.93B** and a **gross margin of 33.4% (+19 bps YoY)**, supporting the case for incremental margin improvement. However, the market may be underestimating the **potential impact of Lowe’s digital initiatives and influencer partnerships** on near-term sales mix and engagement. Key risks remain around weather volatility and persistent housing market headwinds, but the company’s operational discipline and evolving channel mix provide a constructive setup for the quarter.

## Recent Trends Signal What’s Next: Revenue and Margin Trajectory

Lowe’s recent quarters reveal a **stabilizing revenue base** and **improving gross margins**, even as operating margins face slight pressure. The Pro segment’s outperformance is offsetting DIY softness, and management’s execution on cost controls is evident.

### Quarterly Financial Trend Table

| Quarter      | Revenue ($B) | Gross Margin (%) | Operating Margin (%) | Net Margin (%) | EPS   |
|--------------|--------------|------------------|----------------------|---------------|-------|
| Q2 FY2024    | 24.96        | 33.1             | 12.7                 | 8.7           | 4.56  |
| Q3 FY2024    | 20.47        | 33.2             | 12.1                 | 8.3           | 3.06  |
| Q4 FY2024    | 18.60        | 33.3             | 12.0                 | 8.1           | 2.73  |
| Q1 FY2025    | 20.93        | 33.4             | 11.9                 | 8.2           | 2.95  |

**Trend:** Revenue is rebounding sequentially from Q4 lows, with gross margin **improving 30 bps over four quarters**. Operating margin has compressed by 80 bps YoY, but is expected to stabilize in the low 12% range for Q2 FY2025.

## Management’s Forward Tone and Positioning: Cautious Optimism with Execution Focus

Management’s Q1 FY2025 commentary emphasized an “**unwavering focus on execution**” and a “**solidify our commitment to the Pro**” approach. The tone is **more constructive** than in prior quarters, with explicit references to “**early signs of normalization in demand**” and a “**clear path to spring recovery**.” This marks a shift from the more defensive language of late FY2024, where management highlighted “**persistent macro headwinds**” and “**uncertainty in discretionary spend**.” The current guidance reaffirms full-year targets, but with a clear caveat around near-term volatility.

## KPI Trends & Upcoming Quarter Drivers: Pro Mix, Digital, and Store Performance

The most relevant KPIs for Q2 FY2025 are **Pro segment sales mix**, **online sales growth**, and **store productivity**.

### KPI Movement Table

| KPI                   | Q1 FY2024 | Q1 FY2025 | YoY Change | QoQ Change |
|-----------------------|-----------|-----------|------------|------------|
| Pro Sales Mix (%)     | 27        | 30        | +3 pts     | +1 pt      |
| Online Sales Growth % | 4         | 6         | +2 pts     | +1 pt      |
| Store Count (US)      | 1,750     | 1,750     | Flat       | Flat       |

- **Pro Sales Mix:** Up 3 pts YoY to 30%, supporting higher-margin revenue and offsetting DIY weakness.
- **Online Sales:** Growth accelerated to 6% YoY, reflecting early traction from digital initiatives.
- **Store Productivity:** Stable, with no net new stores, focusing on comp sales and operational efficiency.

**Impact:** Higher Pro mix and digital engagement are likely to **support gross margin stability** and **incremental EPS upside** in Q2.

## Missed by the Street: Digital Engagement and Influencer Partnerships

A key overlooked signal is Lowe’s **recent digital refresh and influencer partnerships** (e.g., with MrBeast), which management described as “**exceptional customer service meets a digital refresh**” (Q1 FY2025 Earnings Call). This initiative is not yet fully reflected in consensus models, but early online sales growth (+2 pts YoY) suggests it could **incrementally boost revenue and engagement** in Q2.

## Scenarios for the Upcoming Quarter: Bull, Base, and Bear Cases

### Scenario Table

| Scenario | Revenue ($B) | EPS   | Operating Margin (%) | Key Assumptions                                                      |
|----------|--------------|-------|----------------------|-----------------------------------------------------------------------|
| Bull     | 21.5         | 3.00  | 12.5                 | Strong spring weather, robust Pro conversion, digital outperformance  |
| Base     | 21.33        | 2.95  | 12.3                 | $400M seasonal shift, steady Pro/DIY mix, stable costs                |
| Bear     | 21.1         | 2.85  | 12.0                 | Weak weather, housing drag, muted digital impact                      |

**Most Likely:** The **Base case** is most probable, given management’s reaffirmed guidance, visible Pro momentum, and the expected $400M seasonal demand shift. Upside exists if digital and Pro initiatives outperform, but weather and macro risks cap the bull case probability.

## Appendix – Data Tables & Management Quotes

### Quarterly Revenue, EPS, and Margin Trends

| Quarter      | Revenue ($B) | EPS   | Gross Margin (%) | Operating Margin (%) |
|--------------|--------------|-------|------------------|----------------------|
| Q2 FY2024    | 24.96        | 4.56  | 33.1             | 12.7                 |
| Q3 FY2024    | 20.47        | 3.06  | 33.2             | 12.1                 |
| Q4 FY2024    | 18.60        | 2.73  | 33.3             | 12.0                 |
| Q1 FY2025    | 20.93        | 2.95  | 33.4             | 11.9                 |

### KPI Movement Table

| KPI                   | Q1 FY2024 | Q1 FY2025 | YoY Change | QoQ Change |
|-----------------------|-----------|-----------|------------|------------|
| Pro Sales Mix (%)     | 27        | 30        | +3 pts     | +1 pt      |
| Online Sales Growth % | 4         | 6         | +2 pts     | +1 pt      |
| Store Count (US)      | 1,750     | 1,750     | Flat       | Flat       |

### Key Management Quotes

1. **“We’re seeing early signs of normalization in demand as we enter the spring season.”**  
   *Q1 FY2025 Earnings Call*  
   *Interpretation: Implies management expects a seasonal revenue rebound, supporting Q2 guidance.*

2. **“Our unwavering focus on execution will help us navigate near-term uncertainty.”**  
   *Q1 FY2025 Earnings Call*  
   *Interpretation: Signals operational discipline and cost control as a buffer against macro risks.*

3. **“The Pro continues to be a bright spot, now representing 30% of our sales.”**  
   *Q1 FY2025 Earnings Call*  
   *Interpretation: Highlights the strategic importance and margin benefit of the Pro segment.*

4. **“We are reaffirming our full-year guidance, with a clear path to spring recovery.”**  
   *Q1 FY2025 Earnings Call*  
   *Interpretation: Management confidence in hitting targets, contingent on seasonal demand.*

5. **“Exceptional customer service meets a digital refresh—this is how we win online.”**  
   *Q1 FY2025 Earnings Call*  
   *Interpretation: Digital initiatives are a new lever for growth, not yet fully modeled by the Street.*

6. **“Housing market headwinds remain, but we’re adjusting our mix and marketing accordingly.”**  
   *Q1 FY2025 Earnings Call*  
   *Interpretation: Acknowledges risk, but signals proactive management response.*

7. **“We expect gross margins to remain steady or improve slightly in Q2.”**  
   *Q1 FY2025 Earnings Call*  
   *Interpretation: Sets expectation for margin stability, supporting EPS resilience.*

---

**Bottom Line:** Lowe’s is set for a **modest Q2 rebound** on the back of seasonal demand, Pro strength, and digital engagement, but investors should monitor weather and housing risks closely as the quarter unfolds.

Lowe’s (LOW) Q2: Pro Strength & Digital Drive Upside