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Investment idea - Lowe's

I remain upbeat about the shares of Lowe's, one of the US largest home improvement retailers. The company’s financials for its fiscal 2015 third quarter were strong, with both top and bottom line surpassing consensus estimates. Revenues rose 5% y-o-y to $14.4 bn on the back of improvement in comparable-store sales that grew 4.6% on a consolidated basis and 5% in the US. In dollar terms, gross profit increased 5.8% to $4.99 bn, and gross profit margin expanded 26 basis points to 34.8%. Adjusted earnings per share jumped 35.6% to 80 cents. During the quarter, Lowe's repurchased $750 mn worth of its common stock and distributed $260 mn as dividends.

Lowe’s reiterated its fiscal 2015 guidance. The company continues to expect sales growth of 4.5-5%, while comps, on a consolidated basis, for the year are estimated to grow in the range of 4-4.5%. Operating margin is expected to expand by 80-100 basis points. Further, Lowe’s still expects earnings for fiscal 2015 to be $3.29 per share, which is in sync with the analysts’ average projection.

Moreover, Lowe’s intends to open 15-20 home improvement and hardware stores during the current fiscal year. As of Oct 30, 2015, the company operated 1,849 stores in the United States, Canada and Mexico representing 201.6 mn square feet of retail selling space.

I believe that recovering housing industry and improving consumer sentiment in the US will support demand for Lowe's products and services, and the focus on costs discipline will allow the company to continue to demonstrate solid earnings growth. 

I'd buy Lowe's shares on re-entering an ascending channel, with medium-term target price at $80.