Despite inflation, the home improvement market is expected to record high revenues this year. So, investors could keep track of quality home improvement stocks, WD-40 Company (WDFC), Sherwin-Williams Co. (SHW), and Lowe's Companies, Inc. (LOW).
Homeowners are increasingly opting for remodeling projects to improve their living spaces, increase property values, and customize their homes to fit their unique lifestyles. Many consumers worldwide are also wishing to make their homes more attractive and functional.
In addition, the home remodeling market is booming amid changing customer preferences, home decoration, technology developments, and a healthy housing market. The global home remodeling market is expected to reach $1.32 trillion by 2030, growing at a CAGR of 4.3%.
Furthermore, the upswing in the adoption of advanced smart home technologies such as the Internet of Things (IoT) and Artificial Intelligence (AI) is driving an increased demand for home improvement services.
In light of these encouraging trends, let's look at the fundamentals of the three best Home Improvement & Goods stocks, beginning with number 3.
Stock #3: WD-40 Company (WDFC)
WDFC develops and sells maintenance products, and homecare and cleaning products in the Americas, Europe, the Middle East, Africa, Australia, and the Asia Pacific.
On July 26, 2023, WDFC introduced its newest product innovation, the WD-40 Precision Pen. The WD-40 Precision Pen is compact and portable, engineered to deliver the WD-40 Multi-Use Product, the Original WD-40 Formula, with pinpoint precision.
Ideally suited for tight spaces on projects of all sizes, the WD-40 Precision Pen is designed for use at home, on the job, in workshops, or for exploring new frontiers, and is a direct response from feedback received by end users.
The company’s annual dividend of $3.32 translates to a 1.60% yield on the prevailing prices, while its four-year average dividend yield is 1.40%.
WDFC’s trailing-12-month gross profit margin of 50.05% is 52.4% higher than the 32.83% industry average. Its 16.32% trailing-12-month EBIT margin is 7.9% higher than the 106.74% industry average.
For the first third quarter of fiscal 2024, which ended May 31, 2023, WDFC’s net sales increased 14.6% year-over-year to $141.71 million. Its net income and EPS increased 30.5% and 29% to $18.90 million and $1.38, respectively.
Street expects WDFC’s revenue and EPS for the fiscal fourth quarter (ended August 31, 2023) to increase 6% and 11.6% year-over-year to $138.20 million and $1.21, respectively. Moreover, the company surpassed its EPS estimates in three of the trailing four quarters, which is impressive.
Over the past nine months, the stock has gained 29.9% to close the last trading session at $207.45.
WDFC’s POWR Ratings reflect its robust outlook. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade in Quality. It is ranked #36 out of 59 stocks in the B-rated Home Improvement & Goods industry.
To access additional ratings for WDFC’s Momentum, Growth, Stability, Value, and Sentiment, click here.
Stock #2: Sherwin-Williams Co. (SHW)
SHW engages in the manufacture, distribution, and sale of paints, coating, and related products to professional, industrial, commercial, and retail customers. It operates through three segments: The Americas Group; Consumer Brands Group; and Performance Coatings Group.
SHW’s trailing-12-month ROTC of 13.97% is 149.6% higher than the industry average of 5.60% and trailing-12-month ROTA of 10.11% is 152.8% higher than the industry average of 4%.
In the fiscal second quarter that ended June 30, 2023, SHW’s net sales increased 6.3% year-over-year to $6.24 billion. The company’s net income and adjusted EPS increased 37.3% and 36.5% year-over-year to $793.70 million and $3.29, respectively.
The consensus revenue estimate of $22.79 billion for the fiscal year 2024 represents a 2.9% increase year-over-year. Its EPS is expected to grow 11.8% year-over-year to $9.76 for the same year. Also, the company topped the consensus EPS estimates in each of the four trailing quarters.
The stock gained 20.3% over the past six months to close the last trading session at $261.42.
It’s no surprise that SHW has an overall rating of B, which equates to Buy in our proprietary rating system.
The stock has a B grade in Quality and Sentiment. It is ranked #20 in the same industry
Click here to see the other ratings of SHW (Momentum, Growth, Stability, and Value).
Stock #1: Lowe's Companies, Inc. (LOW)
LOW operates as a home improvement retailer in the United States. The company offers a line of products for construction, maintenance, repair, remodeling, and decorating.
On September 7, 2023, LOW and The Toro Company (TTC) announced a strategic retail partnership through which LOW will carry Toro zero-turn riding mowers, walk mowers, portable power equipment, and snow blowers in both the gas and rapidly expanding battery categories.
On the same day, LOW announced the renewal of its multi-year contract with the NFL for the 2023 season, which will kick off with an integrated marketing campaign featuring a national television commercial, a refreshed roster of LOW's Home Team players, and the release of a limited-edition DIY Wrist Coach accessory that will help fans take on home improvement projects this fall.
On August 18, LOW declared a quarterly dividend of $1.10 per share, payable to shareholders on November 8, 2023.
LOW pays a dividend of $4.40 per share annually, translating to a 2.02% yield on the current price. Its four-year average dividend yield is 1.62%.
LOW’s trailing-12-month levered FCF margin of 6.25% is 22.7% higher than the 5.09% industry average, while its trailing-12-month EBIT margin of 12.72% is 74.88% higher than the industry average of 7.28%.
LOW’s net sales came in at $24.96 billion in the fiscal second quarter that ended August 4, 2023. Also, the company’s net earnings came in at $2.67 billion, and earnings per common share stood at $4.56. Its operating income stood at $3.89 billion.
Analysts expect LOW’s revenue and EPS for the fiscal third quarter ending October 2023 to be $21.10 billion and $3.11, respectively. Moreover, the company surpassed the EPS estimates in each of the trailing four quarters.
The stock has gained 10.2% over the past six months to close the last trading session at $217.50.
LOW’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
LOW is rated a B for Quality. Within the same industry, it is ranked #14 in the same industry.
Beyond what is stated above, we’ve also rated LOW for Momentum, Stability, Sentiment, Value, and Growth. Get all LOW ratings here.
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LOW shares were trading at $218.04 per share on Wednesday morning, up $0.54 (+0.25%). Year-to-date, LOW has gained 11.07%, versus a 17.35% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
The post Lowe's Companies (LOW), Sherwin-Williams (SHW) and WD-40 Company (WDFC): Ranking Home Improvement Stocks appeared first on StockNews.com
