Lowe's Q2 Earnings Beat, Comps Rise Y/Y, View Revised on ADG Inclusion

Lowe’s Companies, Inc. LOW posted second-quarter fiscal 2025 results with year-over-year growth in both the top and bottom lines. While revenues came in just shy of the Zacks Consensus Estimate, earnings surpassed the same. The Mooresville, NC-based home improvement retailer returned to positive comparable sales during the quarter. Management also updated its full-year outlook following the completion of the Artisan Design Group (ADG) acquisition.

LOW’s Quarterly Performance: Key Metrics & Insights

The home improvement retailer posted adjusted earnings of $4.33 per share, which beat the Zacks Consensus Estimate of $4.23. The figure marked a 5.6% increase from earnings of $4.10 per share reported in the same period last year. Including costs related to the acquisition of ADG, quarterly earnings came in at $4.27 per share, up from $4.17 in the prior-year period.

Net sales of $23,959 million marginally missed the consensus estimate of $23,961 million but rose from $23,586 million in the year-ago period. The growth was driven by a 1.1% increase in comparable sales as both Pro and DIY customers contributed despite a challenging start to the quarter from the weather. We had anticipated a 1.5% increase in comparable sales.

Lowe's Companies, Inc. Price, Consensus and EPS Surprise

Lowe's Companies, Inc. price-consensus-eps-surprise-chart | Lowe's Companies, Inc. Quote

LOW’s Margin & Cost Details

Lowe’s reported an adjusted gross margin of 33.8%, an increase of 37 basis points from the same quarter last year. We had expected gross margin to remain flat year over year.

Adjusted selling, general and administrative expenses totaled $4,149 billion, up from $4,068 million from the year-ago period. As a percentage of net sales, the metric came in at 17.3%, almost flat year over year.

The adjusted operating income increased to $3,512 million from $3,404 million a year earlier. We observe that the operating margin expanded 23 basis points to 14.7%. We anticipated a 10-basis-point lift in the operating margin.

Lowe’s Pro Strategy: ADG Closed; FBM Deal Announced

The acquisition of ADG expands Lowe’s ability to capture a greater share of Pro planned spending and strengthens its reach in new home construction. Building on this, the company has entered into an agreement to acquire Foundation Building Materials (FBM) for roughly $8.8 billion.

With more than 370 locations in the United States and Canada, and about 40,000 Pro customers, FBM generated an estimated $6.5 billion in revenues and $635 million in adjusted EBITDA in 2024 on a pro forma basis. The deal, to be funded with debt, is expected to be accretive to adjusted earnings per share in the first full year post-close and significantly advance Lowe’s Total Home and Pro strategies.

LOW’s Financial Health Snapshot

This Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $4,860 million, long-term debt (excluding current maturities) of $30,548 million, and a shareholders’ deficit of $11,400 million.

For the first half of fiscal 2025, operating cash flow totaled $7,610 million, while free cash flow stood at $6,597 million after accounting for capital expenditures of $1,013 million. The company returned value to its shareholders by paying $645 million in dividends during the quarter, in addition to investing $1.3 billion toward the ADG acquisition.

As of Aug. 1, 2025, Lowe's operated 1,753 stores, encompassing a total of 195.5 million square feet of retail selling space.

A Sneak Peek Into LOW’s FY25 Outlook

Management raised its full-year sales guidance to reflect ADG’s contribution. Total sales are now projected between $84.5 billion and $85.5 billion, up from the prior range of $83.5 billion to $84.5 billion. Comparable sales are expected to be flat to up 1%. The operating margin forecast is 12.1%-12.2% (previously between 12.3% and 12.4%), with the adjusted operating margin guided to 12.2%-12.3%.

Lowe’s foresees earnings per share to be in the band of $12.10 to $12.35 (previously $12.15 to $12.40) with adjusted earnings projected in the range of $12.20 to $12.45 per share. Capital expenditures remain guided at approximately $2.5 billion.

Lowe’s Stock Price Performance

Shares of Lowe’s have advanced 17.2% in the past month compared with the industry’s rise of 13%.

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