December’s Consumer Price Index (CPI) and Producer Price Index (PPI) numbers indicate that inflation is finally cooling. This could bolster the discretionary expenses of households and businesses, which should benefit the home improvement industry.

Moreover, rapid urbanization and increasing disposable income are major factors driving the growth of the home improvement industry. The industry is projected to reach $514.90 billion by 2028, growing at a CAGR of 6.4%.

In addition, given the rising consciousness of the environment and focus on sustainability, private players are significantly investing in the construction of green buildings. The need for regular maintenance and repair for green buildings to act efficiently should drive the growth of the home improvement market.

Given this backdrop, fundamentally strong Lowe’s Companies, Inc. (LOW), ADT Inc. (ADT), Masonite International Corporation (DOOR), and La-Z-Boy Incorporated (LZB) might be ideal additions to your portfolio in 2023.

Lowe’s Companies, Inc. (LOW)

LOW is a home improvement retailer operating internationally. The company offers a line of construction, maintenance, repair, remodeling, and decorating products. It also provides installation services.

On January 12, 2023, LOW announced that its retail media network’s advertising sales and operations departments would move in-house, effective by the end of this month.

This should allow LOW’s One Roof Media Network to own the end-to-end customer experience for brand advertisers and partner with them to deliver a richer commerce experience for its customers and boost its returns.

On November 11, 2022, LOW announced a dividend of $1.05 per share, payable on February 8. LOW annual dividend of $4.20 translates to a yield of 2.07% at the current price, compared to the 4-year average dividend yield of 1.61%. Over the past three, LOW’s dividend payouts have grown at 22.9% CAGR. Also, it has paid dividends for 59 consecutive years.

During the fiscal third quarter that ended October 28, 2022, LOW’s net sales increased 2.4% year-over-year to $23.48 billion. Its gross margin grew 3% from the prior-year quarter to $7.82 billion. The company’s net earnings and adjusted EPS came in at $154 million and $3.27, respectively.

Analysts expect LOW’s revenue for the fiscal fourth quarter ending January 2023 to be $22.78 billion, indicating a 6.8% year-over-year growth. The company’s EPS for the same quarter is expected to increase 25.9% from the prior-year quarter to $2.24. Additionally, it has topped consensus EPS estimates in three of the trailing four quarters, which is impressive.

The stock has gained 5.4% over the past six months to close the last trading session at $201.91.

LOW’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

LOW also has a B grade for Quality. It is ranked #14 of 60 stocks in the Home Improvement & Goods industry. To access additional ratings for LOW’s Growth, Value, Stability, Sentiment, and Momentum, click here.

ADT Inc. (ADT)

ADT provides security, interactive, and innovative home solutions to serve residential, small business, and commercial customers in the United States. Its segments include Consumer and Small Business (CSB); Commercial; and ADT Solar business (Solar).

On January 5, ADT introduced innovations in safety for homes, mobiles, and commercial applications at CES 2023 that showcase how the company connects and protects more people virtually anywhere they go.

ADT customers will now be able to easily access and control their ADT devices, including a base, keypad, motion sensors, door and window sensors, smart bulbs, smart locks, smoke/carbon monoxide detectors, and compatible Google Nest Cams and Thermostats, through an intuitive app experience. This should help expand the customer base of the company.

ADT pays a $0.14 per share dividend annually, which translates to a 1.63% yield on the current price. The company has a four-year average dividend yield of 4.41%.

ADT’s total revenue increased 21.8% year-over-year to $1.60 billion in the third quarter of the fiscal year 2022 that ended September 30, 2022, while the company’s adjusted EBITDA grew 11.9% year-over-year to $620 million.

The company reported an adjusted net income of $83 million or $0.10 per share, compared to an adjusted net loss of $54 million or $0.07 per share in the previous-year quarter.

Analysts expect ADT’s revenue for the fiscal first quarter ending March 2023 to grow 9.6% year-over-year to $1.69 billion. Also, its EPS is likely to rise 31.1% year-over-year to $1.12 in the same quarter.

ADT’s revenue is expected to rise 17.4% year-over-year to $1.62 billion for the fiscal fourth quarter that ended December 2022. The company’s EPS for the same period is expected to be $0.21. Additionally, it has topped consensus revenue estimates in three of the trailing four quarters, which is impressive.

Shares of ADT have gained 25.7% over the past nine months to close the last trading session at $8.61.

ADT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The stock has an A grade in Growth and B grade for Stability and Sentiment. Within the same industry, it is ranked #4.

Beyond what is stated above, we’ve also rated ADT for Value, Quality, and Momentum. Get all ADT ratings here.

Masonite International Corporation (DOOR)

DOOR designs, manufactures, markets, and distributes interior and exterior doors for new construction and repair, renovation, and remodeling sectors of the residential and non-residential building construction markets worldwide.

On January 3, DOOR announced the completion of its acquisition of Endura Products (“Endura”).

Howard Heckes, President and CEO of the company said, “We are excited to complete the acquisition of Endura and add their high-performance door frames and door system components to our product portfolio.”

DOOR’s net sales increased 11.7% year-over-year to $728 million in the third quarter that ended October 2, 2022. The company’s adjusted EPS increased 27.1% to $2.53 per share. Also, its adjusted EBITDA came in at $112 million, up 6.7% from the prior-year quarter.

Street EPS estimate of $9.88 for the fiscal year 2022 reflects a rise of 21.1% year-over-year. Its revenue estimate of $2.86 billion for the same year indicates an improvement of 10% from the prior-year period. Additionally, DOOR has topped consensus EPS estimates in each of the trailing four quarters.

The stock has gained 21.9% over the past three months to close the last trading session at $87.74.

DOOR’s robust prospect is reflected in its POWR Ratings. The stock has an overall B rating, equating to Buy in our proprietary rating system.

DOOR has a B grade for Growth, Value, and Momentum. It is ranked #8 in the same industry. Click here to see the additional POWR Ratings for DOOR (Quality, Sentiment, and Stability).

La-Z-Boy Incorporated (LZB)

LZB produces, markets, imports, exports, distributes, and retails accessories and case goods furniture products in the United States, Canada, and internationally. The company operates through Wholesale; Retail; Corporate; and Other segments.

Its four-year average dividend yield is 1.73%, and its annual dividend of $0.73 translates to a 2.65% yield. Over the past three and five years, LZB’s dividend payouts have grown at 8.5% CAGR.

During the second quarter of the fiscal year 2023 that ended October 29, 2022, LZB’s non-GAAP operating income increased 18.5% year-over-year to $61.15 million, while non-GAAP net income attributable to LZB increased 19.7% year-over-year to $45.36 million. Non-GAAP diluted earnings per share increased 23.5% year-over-year to $1.05 for the same quarter.

LZB’s EPS for the third quarter ending January 2023 is expected to grow 1% year-over-year growth to $0.66. Its revenue is expected to be $529.88 million. Additionally, LZB has topped consensus EPS estimates in three of the trailing four quarters.

The stock has gained 20.2% over the past month, closing the last trading session at $27.43.

LZB has an overall rating of B, which equates to a Buy in our POWR Ratings system. It has a grade of B for Quality and Value. LZB is ranked #11 in the same industry.

In addition to the POWR Ratings stated above, we have also rated LZB for Momentum, Stability, Sentiment, and Growth. Get all LZB ratings here.

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LOW shares were trading at $205.58 per share on Tuesday afternoon, up $3.67 (+1.82%). Year-to-date, LOW has gained 3.71%, versus a 5.48% rise in the benchmark S&P 500 index during the same period.

About the Author: Kritika Sarmah

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More...

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