Lehman Raises Lowe's Outlook

Analyst Alan Rifkin says a strong sales improvement helped the home-improvement retailer beat his estimates

Lehman Brothers raised Lowe's (LOW ) estimates and target.

Analyst Alan Rifkin says the 75 cents second-quarter earnings per share beat his 71 cents Street-high estimate, and beat management's guidance of 68 cents to 70 cents. Rifkin ties outperformance to strong sales improvement resulting from better weather, pent-up customer demand, gross margin improvement, and expense control. He notes Lowe's EBIT margin exceeded 11% for first time in its history.

Rifkin raised the $2.22 fiscal 2004 (Jan.) earnings per share estimate to $2.26, and raised the $2.55 fiscal 2005 estimate to $2.60. He still sees third-quarter earnings per share of 51 cents, and says comparison-store sales thus far in the third quarter are tracking above the high end of management's 5%-6% growth guidance. He keeps his equal-weight rating, and upped the price target to $57.

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