The conventional wisdom on the Dow Jones Industrial Average is that it stands as an all-powerful collection of stocks that never change.
The Dow has been around since 1896 and not a single of the original 12 stocks is in the average. The last to leave was General Electric (GE) - Get Free Report in 2018 as the industrial conglomerate struggled with too many weak businesses and was forced to spin off or sell many of its assets.
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The word shockingly is used because Exxon Mobil had been a Dow member since 1928, when the index was expanded to 30 components.
Pfizer joined in 2004. Raytheon became a member after United Technologies merged with Raytheon.
Walmart's split may mean changes ahead
Now it looks like the people who manage the Dow and the Standard & Poor's 500 Index, S&P Dow Jones Indices, part of S&P Global, may be getting ready to change the index again.
If you own 100 Walmart shares now, you will own 300 shares after the split. The stock finished Friday at $165.57. With the split, the price should drop to around $56.00. Walmart has split 11 times since going public in 1974, always 2-for-1 splits.
Walmart's reason for splitting is to make the shares cheaper and more affordable to more of its workforce. Already, some 400,000 Walmart workers (out of a worldwide workforce of 2.1 million) buy company shares regularly through a company-run stock purchase plan.
For employees of most big companies, stock splits are like manna from heaven.
If you work long enough and don't sell, the shares and their value build up. One share of Walmart bought in 1975 and held through all the splits would be worth nearly $87,000 today.
The Dow itself is affected
Walmart's stock-split will have an effect on the Dow itself. Which requires two points:
The Dow is a snapshot of U.S. business and the economy. That's goal, both in terms of what drives them and their health, says S&P analyst Howard Silverblatt.
So, its members should be in the S&P 500, which only admits U.S. domiciled companies. They should be profitable. They should look like the economy.
Increasingly, it brought in tech companies: IBM in 1979; Hewlett-Packard in 1997, Microsoft and Intel (INTC) - Get Free Report in 1999, Apple in 2015, and Salesforce (CRM) - Get Free Report in 2020. It has changed mightily over the years as the economy has evolved. One original member, U.S Leather was liquidated in 1952.
The index is price-weighted. That is, the higher the per-share of the stock, the more impact is has on the value of index. If the stock drops or split, the lower value reduces its impact.
In Walmart's case, the split will drop the company's ranking among Dow stocks from 17th to 25th.
And that will require a change in the Dow's divisor, which determines the index level. You add up the prices of each stock, divide the sum by the divisor, and the result is the index level.
For the record, the current divisor is 0.15172752595384.
If a stock's price is cut, the divisor has to be adjusted so that the index itself stays the same.
Walmart's split may lead to other changes
The likely immediate change in Walmart's case is that all the other Dow stocks will have a little more influence on the index.
But the speculation is Walmart's move is just the start of other moves to deal with economic change. Some stocks, especially pharmacy giant Walgreens Boots Alliance (WBA) - Get Free Report, are weak performers. Walgreens fell 30% in 2023 and is off 13.3% this year.
But if Walgreen's is removed, what goes in?
Potential choices might be
- Costco (Feb. 2 price: $709.48)
- Meta Platforms (META) - Get Free Report (Feb. 2 price: $477.49)
- Google-parent Alphabet (GOOGL) - Get Free Report (Feb. 2 price $142.38)
- Amazon.com (AMZN) - Get Free Report (Feb. 2 price: $171.81)
- Target (TGT) - Get Free Report (Feb. 2 price: $145.49.)
The first three have downsides.
Costco and Meta shares are so pricey that they could swamp the other Dow components.
Meta and Alphabet also have two classes of shares that would have to be organized somehow.
Amazon doesn't pay a dividend, but that wouldn't be a dealbreaker. Target is still working through the effects of the Covid-19 Pandemic.
Let's assume S&P Dow puts in two stocks. Costco is a good possibility and one of Meta, Alphabet or Amazon.
Costco and Meta would want to split their shares. Other than Walmart, S&P's Silverblatt says he hasn't heard of any splits in process.
Amazon is an outlier, but the stock price isn't too high. Adding Costco would kick out Target.
To make it work would require at least one stock split. That's doable, and, certainly, for a chance to be in the Dow, why not?dow jones sp 500 stocks pandemic covid-19
Beer bankruptcy apocalypse claims another fan-favorite brand
Before the covid pandemic, craft breweries had a moment. Beer snobs ruled the day, creating a market for local brewers to expand their businesses into regional distribution.
The demand for interesting beers was clear: Younger drinkers drove a movement that pushed local brewers to challenge the established brands. But that movement was wiped out once covid hit because craft brewers relied on people visiting their breweries.
Even brands that had good distribution in grocery and liquor stores suffered during the period where people could not visit their brewery/bar locations. It was a financial drain that pushed a number of these popular brands to the edge of ruin.
And after the pandemic ended, many of these beer brands suffered as younger consumers moved away from drinking beer, Some embraced the alcohol-free mocktail movement while others simply swapped cocktails, hard seltzers or other alcohol for beer.
Now, the craft beer industry is facing an apocalypse. Most famously, Anchor Brewing, the San Francisco icon that had national distribution, shut down last summer. A wave of bankruptcies followed, including regional favorites like Chicago’s Metropolitan Brewing, New Jersey’s Flying Fish, Denver’s Joyride Brewing, Tampa’s Zydeco Brew Werks and Cleveland’s Terrestrial Brewing.
It has been a devastating run for the craft-beer industry, and the bleeding has not stopped.
It has been a rough period for craft breweries.
Image source: Shutterstock
Another brewery files Chapter 11 bankruptcy
A brewery that touts being at an 8,530-foot elevation, Guanella Pass, also has the distinction of being the first brewery in Georgetown, Colo., since Prohibition. The company described its two locations on its website,
“At the foot of the Guanella Pass Scenic Byway in Historic Georgetown, CO, sits the original Brewery, and at the foot of Berthoud Pass in downtown Empire sits our second tap room and kitchen. A true mountain brewery,” the company says.
“We believe that where you drink beer is as important as what beer you drink. So leave the grind behind, sit for a bit, and share a story or two. Because here, all you need is what you have and a good beer.”
The brewery also distributes its beers regionally at a number of locations in Colorado.
Guanella Pass continues to operate after its late-December Chapter 11 filing and the brewery has an upcoming big event scheduled for Feb. 17.
“Pass it along, there’s a Pig Roast in town! Join us at Guanella Pass for our piggy throw down! We’ll be smokin’ this bad boy starting late Friday night to get ready for our grand meat cutting at 3pm. Feel free to swing by and say hi to our BBQ crew. It’s $15 per plate, come and grab some before we run out,” the company said on its website.
Guanella Pass has a lot of debt
In its bankruptcy filing, Guanella Pass disclosed that it had $2.3 million of debt while bringing in only $860,000 of revenue in the previous year. The company showed $72,000 in assets at the time of the filing.
The brewer, which hopes to restructure its debt and keep operating, has a significant number of creditors,
“It owes $573,000 to First Savings Bank, which loaned it money in 2021, and $256,000 to the Clear Creek Economic Development Corp., a nonprofit that loaned it money in 2019. Both loans are collateralized by the property at 501 Rose St. in Georgetown,” the Denver Post reported.
The brewer also owes its majority shareholders, Steven and Stacey Skalski, $700,000. In addition, the company has an unpaid $135,000 loan with the U.S, Small Business Administration and owes the Colorado Department of Revenue $100,000 along with $32,000 to its food vendor, $22,000 to its bookkeeper and $10,000 to its power company, the newspaper reported.
Public Health from the People
Two Kinds of Private Responses
Following Vernon Smith and his distinction between constructivist and ecological rationality, private actors can engage in two general kinds of public health improvements. They can engage in concerted efforts to improve public health, and they can engage in emergent responses through myriad interactions.1 Three stories below—about William Walsh, Martha Claghorn, and Edwin Gould—indicate concerted efforts to improve public health.
Walsh, a Catholic priest and President of the Father Matthew Society in Memphis, Tennessee, used the society to organize a refugee camp outside of the city and helped hundreds of people avoid yellow fever during the 1878 epidemic—one of the worst yellow fever epidemics in the country.2 Shortly after learning mosquitos carried diseases prior to 1901, Claghorn chaired the Civics committee of the Twentieth Century Club in the Richmond Hill area of Long Island and led a community-wide anti-mosquito campaign, which rid the area of potentially infectious mosquitos.3 After realizing that many of his employees were sick with malaria, Gould—president of the St. Louis Southwestern Railway—used his wealth and business firm to finance and develop an anti-mosquito campaign throughout Texas.4
These stories show how individuals recognize a public health problem given their circumstances and use their knowledge and available resources to resolve the problem. More recently, we might all be familiar with private, constructivist responses to Covid-19. We all made plans to avoid others and produce our desired amount of exposure. Many people made facemasks from old clothes or purchased them from facemask producers. Businesses, retailers, restaurants, and many others adapted in various ways to limit exposure for their workers and customers. My favorite example, albeit not relevant for most, is the so-called bubble that was implemented by the NBA, which housed teams, encouraged play, and limited infection. The NBA finished their season and crowned a 2020 champion only because of the privately designed and implemented bubble solution. The key is that the bubble pursued all of those objectives, not just one of them. All of these responses indicate how private interactions among people can minimize their exposure, through negotiation, discussion, and mutually beneficial means.
In addition to privately designed solutions, emergent public health responses are also important, perhaps even more so. Long-term migration and settlement patterns away from infectious diseases, consumption to improve nutrition, hygiene, sanitation, and the development of social norms to encourage preventative behavior are all different kinds of emergent public health responses. Each of these responses—developed through the actions of no one person—are substantial ways to improve public health.
First, consider how common migration operates as a means of lowering prevalence rates. As soon as people realized that living near stagnant bodies of water increased the probability of acquiring diseases like malaria, they were more likely to leave those areas and subsequently avoid them. Places with such features became known as places to avoid; people also developed myths to dissuade visitors and inhabitants.5 Such myths and associations left places like the Roman Campagna desolate for centuries. These kinds of cultural associations are also widespread; for example, many people in North and South Carolina moved to areas with higher elevation and took summer vacations to avoid diseases like malaria. East End and West End, in London, also developed because of the opportunities people had to migrate away from (and towards) several diseases.6
While these migration patterns might develop over decades, movement and migration also help in more acute public health crises. During the 1878 yellow fever epidemic throughout the southern United States, for example, thousands of people fled their cities to avoid infection. They took any means of transportation they could find. While some fled to other, more northern cities, many acquired temporary housing in suburbs, and many formed campsites and refugee camps outside of their city. The refugee camps outside of Memphis—like the one formed by William Walsh—helped hundreds and thousands of people avoid infection throughout the Fall of 1878.
Second, more mundane public health improvements—like improvements in nutrition, hygiene, and sanitation—are also emergent. These improvements arise from the actions of individuals and entrepreneurs, often closely associated with voluntary consumption and markets. According to renowned medical scientist Thomas McKeown, that is, rising incomes encouraged voluntary changes in consumption, which helped improve nutrition, sanitation, and lowered mortality rates.7 These effects were especially pertinent for women and mothers as they often selected more nutritious food and altered household sanitation practices. With advancing ideas about germs, moreover, historian Nancy Tomes argues that private interests advanced the campaign to improve house-hold sanitation and nutrition—full of advice and advertisements in newspapers, magazines, manuals, and books.8 Following Tomes, economic historians Rebecca Stein and Joel Mokyr substantiate these ideas and show that people changed their hygiene, sanitation, house-hold cleaning habits, and diets as they learned more about germs.9 Such developments helped people to provide their desired exposure to germs according to their values.
Obviously, there were concerted public health improvements during this time that also explain falling mortality rates. For example, waterworks were conscious efforts to improve public health and were provided publicly and privately, with similar, positive effects on health.10 The point is that while we might be quick to connect the health improvements associated with a public water system, we should also recognize emergent responses like gradual changes in voluntary consumption.
Finally, social norms or rules that encourage preventative behavior might also be relevant kinds of emergent public health responses. Such rules identify behavior that should or should not be allowed, they are enforced in a decentralized way, and if they follow from the values of individuals in a community.11 If such rules pertain to public health, they can raise the cost of infectious behavior or the benefits of preventative behavior. Covering one’s mouth when sneezing is not only beneficial from a public health perspective, it also helps avoid earning disapproval.
The condom code during the height of the HIV/AIDS epidemic is another example of an emergent public health rule that reduced infectiousness by encouraging safer behavior.12 People who adopted safer sexual practices were seen to be doing the right thing—akin to taking care of a brother. People who refrained from adopting safer sexual practices were admonished. No single person or entity announced the rule; rather, it emerged from the actions and interactions of individuals within various communities to pursue their goals regarding maintaining sexual activity and limiting the spread of disease. Indeed, such norms were more effective in communities where people used their social capital resources to determine which behaviors should be changed and where they can more easily monitor and enforce infractions. This seems like a relevant factor where many gay men and men who have sex with men live in dense urban areas like New York and Los Angeles that foster LGBTQ communities.
Covid-19 provides additional examples where social norms encouraged the use of seemingly appropriate behavior, e.g., social distancing, the use of facemasks, and vaccination. Regardless of any formal rule in place, many people adapted their behavior because of social norms that encouraged social distancing, the use of facemasks, and vaccination. In communities that valued such behaviors, people that wore face masks and vaccinated were praised and were seen as doing the right thing; people that did not were viewed with scorn. Indeed, states and cities that have higher levels of social capital and higher values for public health tend to have higher Covid-19 vaccine uptakes.13
Improving Public Health and More
While these private approaches can improve public health, can they do more than typical public health approaches cannot? Private approaches tend to lower the total costs of diseases and they limit externalities. Each aspect of private responses requires additional explanation.
Responding to infectious diseases and disease prevention is doubly challenging because not only do we have to worry about being sick, we also have to consider the costs imposed by our preventative behaviors and the rules we might impose. Thus, the total costs of an infectious disease include 1) the costs related to the disease—the pain and suffering of a disease and the opportunity costs of being sick—and 2) the costs associated with preventative and avoidance behavior. While disease costs are mostly self-explanatory, the costs of avoiding infection warrant more explanation. Self-isolation when you have a cold, for example, entails the loss of potentially valuable social activities; and wearing condoms to prevent sexually transmitted diseases forfeits the pleasures of unprotected sexual activity. Diseases for which vaccines and other medicines are available are less worrisome, perhaps, because these are diseases with lower prevention costs than diseases where those pharmaceutical interventions are not available. Governmental means of prevention also add relevant costs. Many readers might be familiar with the costs imposed by our private and public responses to Covid—from isolation to learning loss, and from sharp decreases in economic activity to increased rates of depression and spousal abuse.14 Long before Covid, moreover, people bemoaned wearing masks during the Great Flu,15 balked at quarantine against yellow fever,16 and protested bathhouse closings with the onset of HIV.17
Figure 1 shows the overall problem: diseases are harmful but our responses to those diseases might also be harmful.
Figure 1. The Excess Burden of Infectious Diseases
This figure follows Bhattacharya, Hyde, and Tu (2013) and Philipson (2000), who refer to the difference between total costs and disease costs as the excess burden of a disease. That is, excess burden depends on how severely we respond to a disease in private and in public. The excess burden associated with the common cold tends to be negligible as we bear the minor inconvenience of a fever, a sore throat perhaps, or a couple days off work; moreover, most people don’t go out of their way to avoid catching a cold. The excess burden of plague, however, is more complicated; not only are the symptoms much worse—and include death—people have more severe reactions. Note too that disease costs rise with prevalence and with worsening symptoms but eventually decline as more severe diseases tend to be less prevalent. Still, no one wants to be infected with a major disease, and severe precautions are likely. We might shun all social interactions, and we might use government to impose strict quarantine measures. As disease severity rises along the horizontal axis, it might be the case that the cure is worse than the disease.
The private responses indicated above all help to lower the total costs of a disease because people choose their responses and they use their local knowledge and available resources to select cheaper methods of prevention. Claghorn used her neighborhood connections and the social capital of her civics association to encourage homeowners to rid their yards of pools of water; as such she lowered the costs of producing mosquito control. Similarly, Gould used the organizational structure of his firm to hire experts in mosquito control and build a sanitation department. These are cheap methods to limit exposure to mosquitos.
Emergent responses also help to lower the total costs of a disease because such responses indicate the variety of choices people face and their ability to select cheaper options. People facing diseases like malaria might be able to move away and, for some, it is cheaper than alternative means of prevention. Many people now are able to limit their exposure to mosquitos with screens, improved dwellings, and air conditioning.18 Consider the variety of ways people can limit their exposure to sexually transmitted diseases like HIV. If some people would rather use condoms to limit HIV transmission, they are better off doing so than if they were to refrain from sexual activity altogether. Similarly, some people would be better off having relatively risky sexual activity if they were in monogamous relationships or if they knew about their partner’s sexual history. That people can choose their own preventative measures indicates lower total costs compared with blunt, one-rule-for-all, governmental public health responses.
Negative and positive externalities of spreadable diseases indicate too much infectious behavior and too little preventative behavior, respectively. Hosting a party is fun, but it also incurs the internal costs of the drinks and appetizers and, more importantly, perhaps the external costs of raising the probability that people get sick. Attending a local cafe can be relaxing, but you have to pay for a cup of coffee and you might also transmit a disease to other coffee drinkers. The same could be said for many other public and social activities that might spread diseases like attending a class or a basketball game, transporting goods and people, and sexual behaviors. Our preventative behaviors from taking a vaccine to covering your mouth and from isolation to engaging in safer sexual practices emits positive externalities. If left unchecked, negative and positive externalities lead to higher rates of infection.
For more on these topics, see
“Can We Have Welfare Without the Threat of Violence?” by Max Borders. Library of Economics and Liberty, Nov. 7, 2022.
Keith Smith on Free Market Health Care. EconTalk.
Jay Bhattacharya on the Pandemic. EconTalk.
“Who Attends You When You Are Ill? Attendant Services Under Consumer-directed Health Care,” by Linda Gorman. Library of Economics and Liberty, Jun. 6, 2011.
Overall, we should continue to think more critically about delineating how private and public actors can improve public health and overall welfare. More importantly, we should recognize that private actors are more capable than we often realize, especially in light of conscious efforts to improve public health and those efforts that emerge from people’s actions and interactions. These private efforts might be better at advancing some public health goals than public actors do. Individuals, for example, have more access to local knowledge and can discover novel solutions that serve multiple ends—often ends they value—rather than the ends of distant officials. Such cases and possibilities indicate cheaper ways to improve public health.
 Smith (2009), Rationality in Economics: Constructivist and Ecological Forms, Cambridge University Press.
 For more on Walsh, see Carson (forthcoming), “Prevention Externalities: Private and Public Responses to the 1878 Yellow Fever Epidemic,” Public Choice.
 For more on Claghorn, see Carson (2020), “Privately Preventing Malaria in the United States, 1900-1925,” Essays in Economics and Business History.
 For more on Gould, see Carson (2016), “Firm-led Malaria Prevention in the United States, 1910-1920,” American Journal of Law and Medicine.
 On the connection between malarial diseases, dragons, and dragon-slaying saints, see Horden (1992), “Disease, Dragons, and Saints: the management of epidemics in the dark ages,” in Epidemics and Ideas by Ranger and Slack.
 For more on migration and prevalence rates, see Mesnard and Seabright (2016), “Migration and the equilibrium prevalence of infectious disease,” Journal of Demographic Economics.
 Tomes (1990), “The Private Side of Public Health: Sanitary Science, Domestic Hygiene, and the Germ Theory, 1870-1990,” Bulletin of the History of Medicine.
 Mokyr and Stein (1996), “Science, Health, and Household Technology: The Effect of the Pasteur Revolution on Consumer Demand,” in The Economics of New Goods, NBER.
 See Werner Troesken’s work on public and private waterworks in the U.S. around the turn of the 20th century. See Galiani, Gertler, and Shargrodsky (2005), “Water for Life,” Journal of Political Economy.
 Brennan et al., (2013), Explaining Norms, Oxford University Press.
 For more on the condom code, see Carson (2017), “The Informal Norms of HIV Prevention: The emergence and erosion of the condom code,” Journal of Law, Medicine and Ethics.
 Carilli, Carson, and Isaacs (2022), “Jabbing Together? The complementarity between social capital, formal public health rules, and covid-19 vaccine rates in the U.S.,” Vaccine.
 Leslie and Wilson, “Sheltering in Place and Domestic Violence: Evidence from Calls for Service During Covid-19.” Journal of Public Economics 189, 104241. Mulligan, “Deaths of Despair and the Incidence of Excess Mortality in 2020,” NBER, https://www.nber.org/papers/w28303. Betthauser, Bach-Mortensen, and Engzell, “A systematic review and meta-analysis of the evidence on learning during the Covid-19 Pandemic,” Nature Human Behavior, https://www.nature.com/articles/s41562-022-01506-4
 On the great influenza epidemic, see CBS News, “During the 1918 Flu pandemic, masks were controversial for ‘many of the same reasons they are today’.” Oct. 30, 2020. https://www.cbsnews.com/news/mask-1918-flu-pandemic-controversial/
 On yellow fever quarantine in Mississippi, see Deanne Nuwer (2009), Plague Among the Magnolias: The 1878 Yellow Fever Epidemic in Mississippi.
 On these closures, see Trout (2021), “The Bathhouse Battle of 1984.” https://www.sfaf.org/collections/beta/the-bathhouse-battle-of-1984/
 Tusting et al. (2017), “Housing Improvement and Malaria Risk in Sub-Saharan Africa: a multi-country analysis of survey data.” PLOS Medicine.
*Byron Carson is an Associate Professor of Economics and Business at Hampden-Sydney College in Virginia, where he teaches courses on introductory economics, money and banking, health economics, and urban economics. Byron earned his Ph.D. in Economics from George Mason University in 2017, and his research interests include economic epidemiology, public choice, and Austrian economics.
This article was edited by Features Editor Ed Lopez.
Analyst unveils new Lowe’s stock price target ahead of earnings
They are three letters that represent a multi-billion dollar industry: DIY.
Mention do-it-yourself home repairs, and some people will probably think of This Old House or the 1990s sitcom “Home Improvement,” where Tim Allen portrayed the host of the fictional “Tool Time” TV program.
Others might think of HGTV, the Property Brothers Jonathan and Drew Scott, or Joanna and Chip Gaines of Magnolia Network. Whatever your particular cultural reference, rest assured that the DIY market is a revenue monster.
An estimated 75% of U.S. homeowners take on DIY projects, and 62% named saving money a top reason for their home improvement efforts. As a result, total U.S. home improvement sales amounted to $538 billion in 2021, according to Statista, and is projected to grow to $621 billion in 2025.
The number of do-it-yourselfers climbed during the COVID-19 outbreak as people had more time on their hands, interest rates were at rock bottom, and stimulus checks were flowing.
That was good news for home improvement retailers like Lowe’s, which saw its stock price soar in 2021 thanks to higher demand.
Unfortunately, rising interest rates, inflation, and job uncertainty have increased, denting demand and causing investors to wonder what could happen to Lowe’s shares next.
Lowe’s shares are facing headwinds as do-it-yourself demand slips. Photographer: Luke Sharrett/Bloomberg via Getty Images.
Pullback in DIY spending
Young homeowners are more likely to attempt do-it-yourself projects because they tend to have less disposable income and believe that the DIY approach will be less costly than hiring a contractor.
The most common types of DIY projects are home interior projects, such as painting, flooring, and décor, which are taken on by 31% of homeowners surveyed.
Lowe’s, which reports quarterly earnings on Feb. 27, is the second-biggest name in the home improvement game, behind Home Depot (HD) – Get Free Report, which is slated to release updated earnings results on Feb. 19.
Lowe’s posted better-than-expected third-quarter earnings in November but trimmed its full-year profit forecast, echoing Home Depot’s warning that consumers were spending less on big-ticket items- those worth more than $1,000- heading into the holidays.
“While we’ve seen a more cautious consumer for some time now, this quarter, we saw some of these consumers increasingly prioritizing experiences over goods, spending on travel and entertainment,” Chairman and CEO Marvin Ellison said during a conference call with analysts at the time.
Ellison reminded the analysts that DIY customers drive 75% of the company’s revenue while professionals only account for 25% of sales, as opposed to the broader market where the market is roughly fifty-fifty. “As a result, whenever the DIY customer becomes cautious, it disproportionately affects us.”
Given that backdrop, analysts surveyed by FactSet expect Lowe’s to report earnings of $1.68 per share on sales of $18.3 billion, down from earnings of $2.28 per share and revenue totaling $22.45 billion one year ago.
Lowe’s CEO ‘Bullish’ on home improvement
Ellison said that Lowe’s remained bullish on the home improvement industry’s medium- to long-term outlook.
“We expect home prices to be supported by a persistent supply-demand imbalance of housing, while at the same time, 250,000 millennial household formations are expected per year through 2025, and their parents and grandparents, the baby boomers, increasingly prefer to age in place in their own homes,” he said.
Nevertheless, on Feb. 5, Truist lowered its price target on Lowe’s stock to $244 from $252.
Analyst Scot Ciccarelli told investors in a research note that he is reducing his margin assumptions for fiscal years 2024 and 2025 and cutting his earnings estimates to $12.80 and $14.20 a share from $13.35 and $14.75, respectively.
He did, however, keep his buy rating on the company.
“For the medium-term, we are becoming increasingly bullish on the home improvement sector given general spending resilience, home equity increases, easing comparisons, and the recent positive inflection in Private Residential Fixed Investment PFRI data,” he said.
Ciccarelli said that he believed consumer spending remains fairly steady due to healthy personal balance sheets and strong employment.
In addition, while the tightening cycle should slow spending, it shouldn’t derail it, he said.
The analyst said that while Lowe’s comparable store sales have decelerated notably over the last two quarters—down roughly 7% to 8%– he believes the company will also get to compare against these easier results in the second half of the calendar year.
Ciccarelli added, “We remain buyers and think that LOW can move sharply higher if we are indeed at the early stages of an easing cycle.”
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