Lowe’s profit tops views, forecast raised

The news shaping the markets today

Ukraine’s President Volodymyr Zelenskyy said Russia had not any proposed peace talks. The US dollar index traded higher on the news.

Australia’s unemployment rate eased to 3.4% in October, from 3.5% in the previous month. However, the AUD/USD forex pair remained under pressure.

Japan’s trade deficit widened to ¥2,162.3 billion in October, from ¥ 90.7 billion in the year-ago month. This being the 15th consecutive month of a deficit sent the JPY/USD pair lower in forex trading this morning.

New Zealand’s producer input prices fell to 0.80% in the third quarter, from 3.10% in the previous quarter. Despite this, the NZD/USD forex pair continued to be under pressure.

Singapore’s non-oil domestic exports fell by 5.6% year-over-year in October, after 3.1% growth a month ago. The figure was also worse than the consensus estimates of a 0.6% decline and sent the SGD/USD pair lower in forex trading this morning.

What’s happening: Shares of Lowe’s Companies gained on Wednesday, after the company released upbeat results for its third quarter.

What happened: The home improvement chain reported growth in both sales and earnings for the quarter.

Lowe’s boosted its annual profit projections despite the weakening US housing market, which made one of its major rivals leave its guidance unchanged.

How were the results: The Mooresville, North Carolina-based company reported growth in sales and earnings, with both figures beating market views.

• Sales grew 2.5% year-over-year to $23.48 billion, surpassing the consensus estimate of $23.13 billion.
• Adjusted earnings came in at $3.27 per share, up 13.5% from the year-ago quarter, and surpassing Street expectations of $3.10 per share.

Why it matters: US housing prices have recently been on a downturn. The CoreLogic S&P Case-Shiller Index rose 13% year-over-year in August, down from 15.6% in the previous month, to record the fifth consecutive month of deceleration in annual home price growth.

The rise in mortgage rates have resulted in customers renovating their existing houses, boosting demand in the home improvement business.

Lowe’s comparable sales grew 2.2%, topping the consensus estimate of 0.9%. Comparable sales for its US home improvement business rose 3%. Sales at Lowes.com climbed 12% during the quarter.

The retailer’s gross profits grew 3% year-over-year to $7.8 billion, while profit margins expanded by 20 basis points to 33.30%.

Management raised their guidance for adjusted earnings to $13.65-$13.80 per share, from the previous forecast of $13.10-$13.60 per share. The sales guidance was also raised from $97-$99 billion to $97-$98 billion. Lowe’s said it expects comparable sales to be flat to down 1% in 2022.

Meanwhile, rival Home Depot reported better-than-expected results for the third quarter but kept its full-year forecast unchanged.

How shares responded: Lowe’s shares gained 3% to close at $215.13 on Wednesday, following the release of quarterly results. The stock has gained around 11% over the past six months.

What to watch: Investors will keep an eye on rising mortgage rates. Markets will also monitor discounts and promotions announced by home improvement companies for the all-important holiday season.

The markets today

Crude oil will be in focus today after closing lower on Wednesday

Context: Oil prices fell on Wednesday as traders assessed US government data on crude inventories.

Details: Oil prices received some support during the London trading session, with an oil tanker being struck by a bomb-carrying drone off the coast of Oman. The incident fuelled further geopolitical concerns.

However, crude prices retreated after Hungary’s Foreign Minister Peter Szijjarto said that oil flows via the Druzhba pipeline from Russia had resumed.

There had been some concern around news of a Russian missile hitting Polish farmland and killing two people on Tuesday. However, on Wednesday, Poland officials said there was no indication of this being a deliberate attack on the NATO country. “Most likely this is a Ukrainian air defence missile,” the NATO chief later said.

Rising covid-19 cases in China also weighed on market sentiment, following the easing of restrictions earlier this week.

Moreover, the Energy Information Administration (EIA) said that domestic crude inventories had declined by 5.4 million barrels in the week ended November 11, higher than the market expectations of a decline of 400,000 barrels. The EIA also reported a rise in weekly gasoline inventories by 2.2 million barrels and in distillate inventories by 1.1 million barrels last week.

The International Energy Agency (IEA) warned of a slowdown in demand growth to 1.6 million bpd (barrels per day) in 2023, compared to 2.1 million bpd this year.

WTI crude for December delivery fell $1.33 to close at $85.59 per barrel on the NYMEX on Wednesday, following a 1.2% increase in the previous session. January Brent crude lost $1 to settle at $92.86 per barrel on ICE Futures Europe.

In other energy trading, December gasoline fell 1 cent to $2.51 a gallon, while December natural gas gained 17 cents to $6.20 per million British thermal units.

What are expectations: Traders await the EIA’s data on natural gas stockpiles, which had grown by 79 bcf (billion cubic feet) in the week ended November 4, versus a rise of 15 bcf in the year-ago week.

Markets will also keep an eye on the geopolitical developments, which could significantly impact oil prices.

Other Markets: European trading indices closed lower on Wednesday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 down by 0.25%, 1%, 0.52% and 0.99%, respectively.

Support & resistances for today

Market snapshot

What else to watch today

Eurozone’s passenger car registrations, inflation rate and construction output, Indonesia’s central bank interest rate decision, Italy’s balance of trade, Spain’s balance of trade, India’s money supply M3, Turkey’s gross foreign exchange reserves, as well as US housing starts, building permits, Philadelphia Fed manufacturing index, initial jobless claims, continuing jobless claims and Kansas City Fed’s manufacturing production index.