Key Takeaways
- Morgan Stanley maintained “overweight” ratings for shares of both Lowe’s Cos. and Home Depot after the companies shared results this week.
- Morgan Stanley’s price targets suggest its analysts see a slightly greater upside in Lowe’s stock, though its outlook for both shares is below the Street average.
- The industry has—and likely will remain—somewhat sluggish as high interest rates and a slow housing market deter people from starting major renovation projects.
Which big home improvement retailer—Lowe’s Cos. (LOW) or Home Depot (HD)—looks like a better buy after earnings? It’s close, according to Morgan Stanley, which isn’t looking for big gains in either case.
The bank’s analysts this week reiterated “overweight” ratings on both companies’ shares, restating price targets that imply slightly greater upside for Lowe’s—$255, suggesting an 8.8% rise—than for Home Depot at $410, representing a 7.7% premium. (Those moves are based on each stock’s closing prices on Monday and last Friday, respectively, shortly before the companies reported earnings this week.)
The analysts said Lowe’s was “well managed” and that Home Depot’s performance has been improving since March.
Dramatic improvements aren’t expected in the near term because “large remodeling projects remain anemic,” Morgan Stanley said, referring to a drop-off in major DIY projects because of relatively high interest rates and sluggish home sales.
Shares of both companies fell more than 1% Thursday as broader markets moved modestly after a drab Wednesday. (Read Investopedia’s full coverage of today’s trading here.) Morgan Stanley’s targets on Home Depot and Lowe’s are a bit below Wall Street’s consensus, according to Visible Alpha data.
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