The home improvement industry has been generating solid growth amid the COVID-19 pandemic as people, forced to spend more time at home, have been motivated to  upgrade their living spaces and repurpose existing spaces to make them home offices. Though the economy is reopening at a fast pace, the remote working trend is expected to continue for the foreseeable future, keeping alive the demand for home improvement.

This, along with increasing new home purchases, should keep driving the demand for home improvement products. Indeed, according to Brandessence Market Research, the home improvement market is expected to reach $1155.79 billion by 2026, growing at a 4.5% CAGR .

Because the prospects for the home improvement industry look promising, we think it could be wise to bet on Lowe’s Companies, Inc. (LOW) and The Sherwin-Williams Company (SHW). We believe they are sufficiently financially sound to capitalize on the industry tailwinds.

Lowe’s Companies, Inc. (LOW)

Together with its subsidiaries, LOW operates as a home improvement retailer internationally. The company offers a line of products for construction, maintenance, repair, remodeling, and decorating. It operates more than 1,974 home improvement and hardware stores and sells its products through its websites and mobile application.

On April 22,the company announced the acquisition of the STAINMASTER brand, the most recognized and trusted carpet brand on the market, advancing the home improvement retailer’s Total Home strategy. With this acquisition, it will deliver a compelling product assortment  to customers.

In March, LOW and Chevron announced the exclusive launch of FLEX, a line of cutting-edge, cordless power tools. It is based on a new FLEX 24V lithium-ion battery platform, which delivers 20% more power than competitors and provides faster recharging. The company’s sales are expected to increase with the help of this innovative product.

LOW’s  total revenues increased 26.9% year-over-year to $20.30 billion for the fourth quarter, ended January 29. Its net earnings increased 92.1% year-over-year to $978 million. Also, LOW’s EPS increased 100% year-over-year to $1.32.

For the quarter ending April 30, analysts expect LOW’s EPS and revenue to increase 41.8% and 26.8%, respectively,  year-over-year to $2.56 and $23.4 billion.  It surpassed the Street’s EPS estimates in three of the trailing four quarters. The stock has gained 85% over the past year and closed yesterday’s trading session at $211.31.

LOW’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

The stock has an A grade for Momentum and a B grade for Sentiment and Quality. Within the A-rated Home Improvement & Goods industry, LOW is ranked #10 of 64 stocks.

To see the additional POWR Ratings for LOW (Growth, Value and Stability), click here.

The Sherwin-Williams Company (SHW)

Founded in 1866, the company develops, manufactures, distributes, and sells paints, coatings, and related products to professional, industrial, commercial, and retail customers. SHW operates in three segments: The Americas Group, Consumer Brands Group, and Performance Coatings Group. It offers architectural paints and coatings and branded and private-label architectural paints. And it develops and sells industrial coatings for wood finishing and general industrial applications.

The company’s consolidated net sales increased 12.3% year-over-year to $4.66 billion for the first quarter, ended March 31. And its  net operating cash increased 256% year-over-year to $195.7 million. Its income before income taxes increased 29.7% year-over-year to $509 million. Also, SHW’s adjusted EPS increased 51.5% year-over-year to $2.06.

Analysts expect SHW’s EPS to come in at $9.31 in its fiscal year 2021, which represents a 13.7% year-over-year increase. The company’s revenue is expected to increase 14.2% year-over-year to $5.23 billion for the quarter ending June 30.The stock has gained 57.5% over the past year and closed yesterday’s trading session at $288.65.

It’s no surprise that SHW has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has an A grade for Quality, and B grade for Stability.

Click here to see SHW’s rating for Growth, Value, Momentum and Sentiment as well. SHW is ranked #28 in the A-rated Home Improvement & Goods industry.

LOW shares were trading at $204.17 per share on Tuesday afternoon, down $7.14 (-3.38%). Year-to-date, LOW has gained 28.02%, versus a 10.81% rise in the benchmark S&P 500 index during the same period.

About the Author: Nimesh Jaiswal

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...

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