The home improvement market has generated significant growth since the onset of the COVID-19 pandemic as people have been forced to spend more time at home, which has increased their interest in the home improvement and maintenance. In addition, owners’ preference for modern and energy-efficient solutions encourages them to invest in sustainable restructuring and renovation works to limit environmental impacts. With this tailwind, the home improvement services market is expected to reach $585.30 billion by 2030, registering a CAGR of 6.2% from 2021 to 2030.
However, there is a shortage of affordable housing in developed regions, while real estate prices are soaring, prompting homeowners to renovate their existing homes rather than move into new homes. Additionally, renovating newly purchased old houses before moving in is another trend contributing to the growth of the industry.
In this context, we believe that well-established home improvement companies Lowe’s Companies, Inc. (moo) and Mohawk Industries, Inc. (MHK) could be solid bets now.
Lowe’s Companies, Inc. (moo)
Low in Mooresville, North Carolina, is a home improvement retailer in the United States and abroad. The company offers construction, maintenance, repair, renovation and decoration products.
On November 17, LOW announced a multi-year commitment to become the leading retail destination for aging-in-place and life-changing solutions with the launch of Lowe’s Livable Home. The company also extends its service options to customers seeking appraisals through Lowe’s associates and Lowe’s network of independent service providers. This unique destination should help LOW attract more customers and strengthen its position in the industry.
Also in November, LOW announced the upcoming launch of Measure Your SpaceBETA, an intuitive end-to-end room scanning, measuring and estimating experience within Lowe’s iOS app. The company invests in emerging technologies such as LiDAR, AI and mixed reality to make home improvement simple and intuitive. “We call this the future of space commerce, and we’re excited to bring it to our customers,” said Seemantini Godbole, Lowe’s executive vice president and chief information officer.
LOW’s net sales rose 2.7% year-over-year to $22.92 billion in its fiscal third quarter, which ended Oct. 29. Its operating profit was $2.79 billion, up 28.2% from the same period last year. Its net profit rose 174% from its value a year ago to $1.90 billion. And that of society PES rose 200% year over year to $2.73.
A consensus revenue estimate of $20.84 billion for its fiscal fourth quarter, ending January 2022, indicates a 2.6% improvement over the same period last year. Analysts expect the company’s EPS to be $1.69 in the current quarter, reflecting a 27.1% year-over-year increase. Additionally, LOW has exceeded Street’s EPS estimates in each of the past four quarters.
LOW has gained 58.1% in price over the past year and 32.7% over the past six months to close yesterday’s trading session at $257.79.
LOW’s strong fundamentals are reflected in its POWR ratings. LOW has an overall B rating, which is equivalent to buying in our own POWR Rankings system. POWR ratings are calculated by considering 118 separate factors, with each factor weighted to an optimal degree.
LOW has a B rating for feeling and quality. Among the 61 B-rated stocks Home improvement and goods industry, LOW is ranked #9.
Beyond what we have indicated above, we also rated LOW for Growth, Value, Momentum and Stability. Click here to display all LOW odds.
Mohawk Industries, Inc. (MHK)
MHK in Calhoun, Georgia, designs, manufactures, sources, distributes and markets flooring products for renovation and new construction of residential and commercial spaces worldwide. It operates through three segments: Global Ceramic; Flooring North America (Flooring NA) and Flooring Rest of the World (Flooring ROW).
The company signed The Climate Pledge, a sustainability-focused effort, and agreed to integrate climate-responsive strategies, neutralize remaining emissions with permanent and socially beneficial offsets, achieve annual net zero carbon emissions by 2040 and implement decarbonization strategies.
MHK’s net sales rose 9.4% year-over-year to $2.82 billion in its fiscal third quarter, which ended Oct. 2. Its operating profit rose 37% from its value a year ago to $359.97 million. Its adjusted net profit was $272.05 million, representing an increase of 16.8% over the same period last year. And the company’s adjusted EPS rose 21.2% year over year to $3.95.
Analysts expect MHK’s revenue to grow 17% year-over-year to $11.17 billion in its 2021 fiscal year. The consensus EPS estimate of $14.77 for the year indicates a 67.3% year-over-year increase. The company has an impressive track record of earnings surprises; it has beaten consensus EPS estimates in each of the past four quarters.
Over the past year, the stock price has gained 26.2% to close yesterday’s trading session at $180.47.
It’s no surprise that MHK has an overall rating of B, which equates to a buy rating in our proprietary POWR rating system. MHK also has a B rating for Value, Momentum and Quality. It is ranked #6 in the Home improvement and goods industry. Click here to display additional MHK ratings for Growth, Sentiment and Stability.
LOW shares were trading at $252.16 per share Friday morning, down $5.63 (-2.18%). Year-to-date, LOW is down -2.45%, compared to a -2.04% rise in the benchmark S&P 500 over the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a master’s degree in economics, she gained knowledge in equity research and portfolio management at Finlatics. Following…