Lowe's (LOW) Stock Forecast & Price Target

Lowe's Companies, the second-largest home improvement retailer globally, reported a modest improvement in gross margins, achieving 34.2%, which represents a 50 basis points increase year-over-year, driven by factors such as reduced losses in its credit program and effective inventory management. The firm's sales reached $20.8 billion, reflecting a 3.2% increase, alongside a comparable sales growth of 0.4%, indicating resilience in both pro and DIY segments despite market challenges impacting larger discretionary projects. Additionally, the introduction of a home improvement-focused Marketplace, coupled with enhanced online sales strategies, positions Lowe's well for continued revenue growth and market share expansion in a competitive landscape.

Lowe's Companies has recently experienced a year-over-year decline in inventory of $400 million, reaching $17.2 billion, but higher tariffs are expected to exert pressure on future inventory levels, particularly in the fourth quarter of 2025 and the first half of 2026. Estimates for earnings per share (EPS) have been revised downward for 2025 and 2026, reflecting a negative impact from the acquisition of lower-margin businesses, which is projected to result in a contraction of operating margins by 20 basis points in 2025 and an additional 30 basis points in 2026. Additionally, a potential slowdown in industry sales due to interest rate increases or a shift in consumer spending away from home improvement could derail Lowe's margin expansion efforts, as declining unit volumes and unfavorable employment trends further threaten sales.