Can Lowe's Pro Growth Justify Its Valuation Despite DIY Weakness?

Lowe's Companies, Inc. LOW is trading at a discount to key benchmarks, but that discount comes with weaker near-term demand and earnings expectations. The central question is whether its expanding Pro platform can offset a still-cautious DIY customer.

Pro, online and Home Services are adding growth avenues, while soft housing activity and lower guidance limit near-term visibility. That mix creates a relative valuation discount, but timing remains important.

Lowe's Valuation Offers a Relative Discount

LOW trades at 16.1X forward 12-month earnings, below the Zacks sub-industry's 19.2X, the Zacks Retail-Wholesale sector's 22.7X and its five-year median of 17.5X. The gap gives investors a cheaper entry multiple than those reference points.

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The discount is not automatically a bargain. Lowe's fiscal 2026 adjusted earnings guidance was reduced to about $12.25 per share, while third-quarter adjusted earnings are expected to decline roughly 7% year over year. A lower multiple therefore partly reflects weaker near-term earnings momentum.

Pro Growth Gives LOW a Durable Demand Engine

Lowe's is broadening its Pro reach through Foundation Building Materials and Artisan Design Group. FBM adds faster fulfillment, digital tools, trade credit and cross-selling opportunities, while ADG expands design, distribution and installation capabilities for builders and property managers.

The Home Depot, Inc. HD also reported positive Pro comparable sales that outperformed DIY in its second quarter, offering another sign that professional demand has held up better than DIY among major home-improvement retailers. For Lowe's, deeper capabilities with larger Pros could become more valuable as construction activity improves.

Digital and Services Broaden Lowe's Upside

Online sales increased 15.7% in the second quarter, while Home Services delivered another quarter of growth. MyLowe's Rewards has more than 30 million members, giving Lowe's a larger base for targeted offers and repeat engagement.

Mylow is another conversion tool. Management said online shoppers who use the artificial intelligence shopping agent convert at three times the rate of those who do not. Better digital engagement, installation services and fulfillment can help Lowe's capture a larger share of project spending.

DIY and Housing Risks Keep LOW in Check

Comparable transactions fell 2.1% in the second quarter as customers favored repair, maintenance and smaller projects over larger discretionary work. Lowe's reduced fiscal 2026 comparable-sales guidance to flat from its prior flat-to-up-2% range.

Housing weakness also limits the near-term payoff from expansion. ADG is fully exposed to residential construction, while about 45% of FBM is tied to that market. Builders FirstSource, Inc. BLDR reported an 8.8% second-quarter sales decline, primarily due to lower housing starts and related headwinds, underscoring the pressure facing construction-linked demand.

Cash Flow Supports Lowe's Long-Term Strategy

Lowe's generated about $7 billion of operating cash flow in the first six months of fiscal 2026 and spent $1.1 billion on capital expenditures. It also paid $1.3 billion in dividends and repaid $2.4 billion of debt.

That liquidity supports continued investment without ignoring balance-sheet discipline. Lowe's ended the second quarter with $3.2 billion in cash and $5 billion of undrawn revolving-credit capacity, while management expects to reach its 2.75-times leverage target by mid-2027.

LOW's Mixed Signals Argue for Patience

Lowe's relative valuation discount and expanding Pro, digital and services platforms support the long-term case, but weaker DIY demand, housing pressure and reduced earnings expectations keep the near-term risk-reward mixed.

LOW currently carries a Zacks Rank #4 (Sell). Its VGM Score of B, Growth Score of B and Momentum Score of B indicate favorable characteristics in those styles, while the Value Score of C is less favorable than the B grades. Because Zacks Style Scores are designed to complement rather than override the Zacks Rank, the current combination argues for patience until the earnings-estimate backdrop improves. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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