The Potential Benefits for Lowe’s Amidst Federal Reserve Rate Cuts

J.P. Morgan Raises Rating on Lowe’s Stock

In a recent analysis, J.P. Morgan argues that Lowe’s, the home-improvement company, stands to benefit from the Federal Reserve’s decision to cut interest rates this year. As a result, J.P. Morgan has upgraded Lowe’s stock rating to Overweight from Neutral and raised its target stock price to $265 from $210. This move positions Lowe’s as a potential value investment, according to the bank’s Analyst Focus List.

Anticipated Rate Cuts and Their Impact on Sales

The market’s expectation of interest rate cuts suggests a potential decrease in mortgage rates as well, according to J.P. Morgan. Lower mortgage rates could lead to an increase in sales of existing homes, which bodes well for Lowe’s. The analysts speculate that this trend could drive a surge in Do-It-Yourself (DIY) projects, as home sellers invest in small upgrades and new buyers purchase essential items for their new homes.

Conservative Guidance for 2024

J.P. Morgan predicts that Lowe’s will take a conservative approach to its guidance for 2024. The bank forecasts per-share earnings between $12 and $12.50, slightly lower than the consensus among analysts, who expect around $13 a share according to FactSet data. In its third-quarter financial report filed in November, Lowe’s revised its 2023 earnings guidance to approximately $13 a share, down from the previous range of $13.20 to $13.60.

Looking Ahead

Lowe’s fourth-quarter financial results are set to be released towards the end of the month. J.P. Morgan highlights several factors that could contribute to Lowe’s success this year, including rate cuts and a potential uptick in home sales. The bank anticipates that the management’s guidance will indicate a stronger second half of the year.

Stock Performance

On Monday, Lowe’s stock experienced a 3.3% increase, reaching $229.51, while Home Depot saw a 1.2% jump to $367.45. In comparison, the S&P 500 remained relatively stable.

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