The home improvement industry has been surging over the past year as consumers spent more time indoors amid a hastily adopted remote-working-and-learning culture courtesy of the COVID-19 pandemic. Now that more millennials are buying homes, given low mortgage rates, or are remodeling their old homes to make their living spaces more comfortable, the home improvement market is gaining noteworthy momentum. The industry has been enjoying favorable investor sentiment, as is evident in the SPDR Homebuilders ETF’s (XHB) 130.3% returns over the past year, compared to the S&P 500’s 46.4% gains. The global home improvement market is expected to grow at a CAGR of 4.5% over the next five years to reach $1155.79 billion in 2026.
However, despite being one of the major beneficiaries of this trend, The Home Depot, Inc. (HD – Get Rating)–one of the largest home improvement retailers in the world–has been struggling lately. HD’s profitability was negatively impacted in the fourth quarter, ending January 31, 2021, due to surging lumber and transportation costs. Its operating expenses were also significantly higher during this period.
Conversely, here are some home improvement players that have been benefiting consistently from the industry tailwinds: Lowe’s Companies, Inc. (LOW – Get Rating), The Sherwin-Williams Company (SHW – Get Rating), and Stanley Black & Decker, Inc. (SWK – Get Rating). So, we think it could be wise to invest in these stocks in lieu of HD.
LOW is a home improvement retailer that offers various products for construction, maintenance, repair, remodeling, and decorating. In addition, it offers home improvement products under categories such as appliances, decor, lighting, lawn and garden, and outdoor living.
This month, LOW introduced an upgraded shopping experience for PRO customers. It offers them various perks, like new and enhanced products and services, and free phone charging stations to make their shopping experiences convenient and quicker. This move should help LOW to its PRO customers and ultimately increase its sales.
In March, the company announced the introduction of free family project kits coupled with project inspiration for a month-long “SpringFest” celebration. Since people are spending more time at home because of the pandemic, the project should significantly improve LOW’s customers’ experience.
LOW’s net sales increased 26.7% year-over-year to $20.31 billion in the fourth quarter, ended January 29, 2021. Its net earnings grew 92.1% from the year-ago value to $978 million, while its operating income grew 59.1% year-over-year to $1.52 billion. The company’s EPS increased 100% from its year-ago value to $1.32.
A $2.49 consensus EPS estimate for current quarter, ending April 30, 2021, represents a 40.7% improvement year-over-year. The consensus revenue estimate of $23.12 billion for the current quarter represents a 26.2% increase from the same period last year. The stock has gained 113.2% over the past year.
LOW’s POWR Ratings reflect this promising outlook. The company has a B overall rating, which translates to Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
LOW is also rated A in Momentum, and B in Sentiment and Quality. Within the A-rated Home Improvement & Goods industry, it is ranked #15 of 64 stocks.
To see additional POWR Ratings for Growth, Value, and Stability for LOW, Click here.
Founded in 1866, SHW develops, manufactures, and sells architectural paints, coatings, and related products to professional, industrial, commercial, as well as retail customers. The company operates through three segments: The Americas Group, Consumer Brands Group, and Performance Coatings Group.
In March, SHW introduced an exclusive program called PRO+. The program offers benefits such as personalized service and support, online access to free online courses and industry resources, price cuts and 0% interest credit to professional customers to manage their business. This should help SHW in growing its customer base and increasing its sales.
In January, the company introduced its…
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