The remote working culture ushered in by the COVID-19 pandemic has been a boon for the home improvement industry because people have prioritized upgrading their homes or shifting to bigger living spaces in suburban areas. While the economy’s reopening has reduced the demand for home improvement products to an extent, as people focus on outdoor activities, organizations' continued adoption of hybrid working structures should drive their employees’ continued spending on home improvement.
The red-hot housing market and the trend in buying old homes should keep driving the demand for home improvement products and services. According to a recently published Allied Market Research report, the global home improvement services market is expected to grow at a 6.2% CAGR from 2021 - 2030.
Increasing disposable income with the falling unemployment rate should further support the growth of the home improvement industry. So, we think fundamentally sound home improvement stocks Lowe's Companies, Inc. (LOW), Stanley Black & Decker, Inc. (SWK), Mohawk Industries, Inc. (MHK), and Snap-on Incorporated (SNA), whose prices are currently down from their recent highs, could be solid bets now.
Lowe's Companies, Inc. (LOW)
LOW is a home improvement retailer based in Mooresville, N.C., that t offers a line of products and services for construction, maintenance, repair, remodeling, and decorating through its stores worldwide. The company sells its products through websites and mobile applications. As of January 29, 2021, it operated 1,974 home improvement and hardware stores.
On April 22, 2021, LOW acquired the STAINMASTER brand that offers carpets, hard flooring, and home cleaners. The acquisition is a step in advancing LOW’s Total Home strategy by delivering a compelling product assortment to its customers. LOW expects to achieve expanded market reach in the coming months.
LOW’s net sales came in at $24.42 billion for its fiscal first quarter, which ended April 30, 2021, representing a 24.1% year-over-year rise. The company’s gross profit increased 24.8% year-over-year to $8.13 billion. Its operating income is reported at $3.25 billion, up 63% from the prior-year period. While its comprehensive income increased 126.5% year-over-year to $14.84 billion, its adjusted EPS increased 82.4% year-over-year to $1.95. As of April 30, 2021, the company had $6.69 billion in cash and cash equivalents.
A $3.96 consensus EPS estimate for the current quarter, ending July 31, 2021, represents a 5.7% improvement year-over-year. LOW surpassed consensus EPS estimates in three of the trailing four quarters. Analysts expect the stock’s EPS to grow at 19.1% per annum over the next five years. The stock has gained 33.6% over the past year and 3.9% over the past month. It closed yesterday's trading session at $194.11, 9.4% lower than its 52-week high of $214.33.
LOW’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an A grade for Momentum, and a B grade for Sentiment and Quality. Click here to see the additional ratings for LOW (Growth, Stability, and Value).
LOW is ranked #22 of 63 stocks in the A-rated Home Improvement & Goods industry.
Stanley Black & Decker, Inc. (SWK)
SWK is a global provider of power and hand tools, related accessories, mechanical access solutions, electronic security, and monitoring systems for various industrial and commercial applications. The company is based in New Britain, Conn.
Through a multi-year partnership announced on July 15, 2021, SWK has become the Official Tools and Storage Partner of the British-based racing team McLaren Racing Limited’s Formula 1 team. SWK will support the McLaren Formula 1 team at and away from the track by outfitting the team with SWK’s DEWALT brand and a range of its other iconic tools.
During its fiscal first quarter, ended April 3, 2021, SWK’s net sales increased 34.1% year-over-year to $4.20 billion. The company’s non-GAAP gross profit came in at $1.57 billion, up 52.1% from the prior-year period. Its non-GAAP operating profit is reported at $736.60 million for the quarter, representing a 135% improvement year-over-year. While its non-GAAP net earnings increased 174% year-over-year to $500.80 million, its non-GAAP EPS increased 160.8% year-over-year to $3.13. The company had $949.20 million in cash and cash equivalents as of April 3, 2021.
Analysts expect SWK’s revenue to improve 5.6% year-over-year for the current quarter ending September 30, 2021, to $4.07 billion. SWK surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock’s EPS is expected to grow at a 13.2% rate per annum over the next five years. SWK has gained 34% over the past year and 4.6% over the past month. It ended yesterday’s trading session at $203.94, 9.1% lower than its 52-week high of $224.26.
It’s no surprise that SWK has an overall A rating, which translates to Strong Buy in our POWR Ratings system.
The stock has an A grade for Growth, and a B grade for Value and Sentiment. Click here to see the additional ratings for SWK (Stability, Momentum, and Quality).
SWK is ranked #6 in the Home Improvement & Goods industry.
Mohawk Industries, Inc. (MHK)
MHK in Calhoun, Ga., is a flooring manufacturer that offers various products for remodeling and new constructions of residential and commercial spaces worldwide.
This month, MHK has introduced its sustainable mobile showroom for The Waterways Project, the first mobile showroom in the flooring industry. The mobile experience is designed to provide a collaborative, immersive event that brings the latest industry-leading product innovation to the public. MHK hopes to generate good sales through the showroom in the coming months.
For its fiscal first quarter ended April 3, 2021, MHK’s net sales increased 16.8% year-over-year to $2.67 billion. Its adjusted gross profit came in at $802.25 million, up 27.8% from the prior-year period. MHK’s adjusted operating income has been reported at $329 million, representing a 101.3% year-over-year improvement. Its adjusted earnings came in at $245.95 million for the quarter, representing a 106% rise from its year-ago period. Its adjusted EPS increased 110.2% year-over-year to $3.49. As of April 3, 2021, the company had $557.26 million in cash and cash equivalents.
MHK’s EPS is expected to improve 4.6% year-over-year in the current quarter, ending September 30, 2021, to $3.41. MHK achieved the Street’s EPS estimates in each of the trailing four quarters. The 2.74 billion consensus revenue estimate for the current quarter represents a 6.3% rise year-over-year. Its EPS is expected to grow at a 4% rate per annum over the next five years. MHK has gained 136.8% over the past year and 3.2% over the past month. It closed yesterday’s trading session at $186.52, 19.5% lower than its 52-week high of 231.80.
MHK’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.
The stock has a B grade for Growth, Value, and Quality. We have also graded MHK for Sentiment, Stability, and Momentum. Click here to access all MHK’s ratings.
MHK is ranked #7 in the Home Improvement & Goods industry.
Snap-on Incorporated (SNA)
SNA manufactures and markets hand and power tools, diagnostics and shop equipment, and repair information and systems solutions for professional users, primarily in the automotive service industry worldwide. The Kenosha, Wis., company also provides financing programs to facilitate the sales of its products and support its franchise business.
On March 8, 2021, SNA acquired Dealer-FX Group, Inc., a developer, marketer, and provider of service operations software solutions, for approximately $200 million in cash. With Dealer-FX's digitized solution, SNA expects to increase the productivity of its OEM and dealership business in its Repair Systems & Information Group that provides electronic parts catalogs, essential tool and diagnostics programs, and custom analytics and achieve expanded market reach in the near term.
SNA’s total revenue for its fiscal first quarter ended April 3, 2021, was $1.11 billion, representing an 18.7% year-over-year improvement. The company’s adjusted operating earnings were $266.20 million for the quarter, up 30.9% from the prior-year period. While its adjusted net income increased 34.5% year-over-year to $192.60 million, its adjusted EPS increased 34.6% year-over-year to $3.50. As of April 3, 2021, the company had $904.60 million in cash and cash equivalents.
Analysts expect SNA’s revenue to improve 3% year-over-year for the current quarter ending September 30, 2021, to $969.59 million. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Analysts expect the stock’s EPS to grow at a 9.7% rate per annum over the next five years. SNA has gained 62.8% over the past year and 5% over the past month. It closed yesterday’s trading session at $223.26, 13.7% lower than its 52-week high of $258.71.
SNA’s POWR Ratings reflect its solid prospects. The company has an overall B rating, which translates to Buy in our proprietary ratings system.
SNA has an A grade for Quality, and a B grade for Value. In addition to the POWR Ratings grades we’ve just highlighted, one can see SNA’s ratings for Growth, Stability, Sentiment, and Momentum here.
SNA is ranked #25 in the Home Improvement & Goods industry.
LOW shares were trading at $194.72 per share on Wednesday afternoon, up $0.61 (+0.31%). Year-to-date, LOW has gained 22.61%, versus a 16.73% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
The post 4 Buy the Dip Home Improvement Stocks appeared first on StockNews.com