Company Description
Lowe's, a Fortune 100 company with sales of $26.5 billion, has
more than 900 stores in 45 states. For more information, visit
Lowes.com.
[Source: Company Press Release]
Reasons to Invest:
Remodeling season might be over for 2003, but 2004 is just around the corner. With so many shows like Trading Spaces, Design on a Dime, and House Rules, do-it-yourself home improvements have taken charge of this Drip of the Week.
If you have not already figured it out, I am fond of Lowe's long-
term outlook. Why Lowe's you ask? First, the fact that they are
opening new stores in an economy where uncertainty reigns is
impressive. On December 10th, 2003 Lowe's announced that they
were expanding their store operating divisions to five from
three, in order to stay up with the support of national growth.
Secondly, throughout the later course of 2003, Lowe's continued
to raise its proverbial ceiling, eventually reaching an all-time
high of 60.42. Additionally, LOW just breached the bottom of its
regression channel (12/10/03), which would have provided a nice
entry point. Today (12/11/03) the stock returned to the inner
skeleton of the channel signaling that the recent weakness was
just a reflection of overdue profit taking.
Moreover, Lowe's yields a 0.22% dividend, which is a semi-nice
incentive. The company also has an annual dividend of $0.12 per
share owned. I know a dividend of $0.12 is really nothing to
write home about, but I like the stocks price movement over the
past year and anticipate more of the same for 2004. Their next
dividend is payable January 30th, 2004 to shareholders on record
as of January 16th (just something to keep in mind if we are
triggered to add the DRIP).
I also like the fact that Lowe's added more than 65% since
February of 2003. Additionally, growth in sales, earnings, and
free cash flow, as well as headlines like "Lowe's Q3 Raises the
Bar," "Lowe's Sturdy Q2," and "Lowe's Raises the Roof," make this
stock more than appealing to me. I think that a year or two ago,
Lowe's was a moneymaker's secret as it was overshadowed by its
archrival, Home Depot. However, now that Lowe's is trading at 25
times 2002's earnings, I think we all can agree its been
discovered. The grass is greener at Lowe's as it continues to
bite at its orange apron villain's profits. Let's take the
fiscal year of 2002 for example. Home Depot's earnings rose by
an remarkable 20%, which is weak in comparison to Lowe's 44
percent growth. Home Depot's sales rose by 9%, which does not
compare well to Lowe's 21% increase in sales.
In January of this year, Home Depot recorded a 6% decline in
sales, while Lowe's fashioned a 17% rise in sales and a 46% boost
in profits. When I compare these two stores I can help but to
think of the analogy, the "trend is your friend." Now when you
compare the two, what trend would you rather follow? I believe
that there is raw sex appeal here, as I am nearly certain that
women are more attracted to the cleaner, brighter lit Lowe's
store than they are to the dimmer saw-dust blanketed floor of
Home Depot. Don't get me wrong, I like doing home improvements
just as much as the next man, but with the newest fad of do-it-
yourself reality television series, my wife has been more
enthusiastic than ever. In my opinion, Home Depot is the Hammer
and Nail store, while Lowe's is the one handed, air compressed
nail gun, of which is ready to rupture through the market's glass
ceiling.
On top of that, Lowe's plans to open 140 more stores (this would
give them more than 1000 stores) in 2004, as well as an
additional 150 stores in 2005. I can't argue with their growth
perspective as they are self-budgeting their entire proposed
expansion.
LOW's current trend looks similiar to March-May trend of 2003.
On May 20th the stock closed under its regression channel only to
return back to its channel the next trading day. This is the
same thing that happened today (12/11/03). After May 20th, the
stock gained more than 20 points before a consolidating period of
profit taking took place (just like right now). If all goes well
we could see the stock ready to repeat this trend.
Best case scenario, come January Lowe's beats earnings estimates
of $0.61, retests the 60 mark, profit taking occurs and the stock
dips a little allowing new buyers in for a lower premium. I
would like to suspect to see an entry in the 55-56 area formulate
once 60 is retested. New buyers (that would be us) continue to
feed cash into LOW and it gets vertical resting around the 70
range come April. Profit taking occurs, making the stock cheaper
and more attractive to new buyers (remember traders like to buy
the dip). The stock moves sideways around new psychological
resistance of 70 and then on the announcement of more good news,
beating estimates or grand opening of new stores, the stock
breaks over 70 and then uses the 70 level as support as opposed
to resistance.
This ends another exciting episode of the DripAdvisor.com Drip of
the Week. Stay tuned next week, as we will spotlight another
stock worthy of the DripAdvisor.com limelight.
Until Next Week,
Nich Sheldon
Editor
Broker Recommendations
Strong Buy 3
Buy 6
Hold 8
Sell 0
Strong Sell 0
Brokers Covering 17
DRIP Information:
Shares to Qualify = 1
Auto-reinvestment = Yes
Accept Foreign Accounts: Yes
Temper Enrollment: Yes
Min/Max Investment = $250,000/Year
Reinvestment Fees -
Dividend investment fees: 0
Cash investment fees: 5% to $2.50+5c/share
Auto reinvestment fees: 5% to $2.50+5c/share
Transfer Agent:
Wachovia
877-282-1174
Corporate Headquarters:
9295 Prototype Drive
Reno, NV 89511
Phone: (775) 448-7777
Fax: (775) 688-0777
