We have recently initiated coverage on Lowe’s Companies, Inc. (LOW), the world’s second largest home improvement retailer operating in the United States and Canada, with a Neutral recommendation and a target price of $24.00. We expect it to perform in line with the industry.

Based in Mooresville, North Carolina, Lowe’s offers services to homeowners, renters and commercial business customers. Homeowners and renters principally include do-it-yourself (DIY) customers and do-it-for-me (DIFM) customers who utilize the company’s installed sales programs. Lowe’s offers a wide range of products and services for home decoration, maintenance, repair, remodeling, and property maintenance.

Lowe’s boasts a proven strategy of investing in stores to enhance the customer-shopping experience by improving point-of-sale and directional signage, and adding more product selection. The company’s sustained focus on Everyday Low Prices, New Lower Price, and Specialty Sales initiatives has helped it to grow its market share.

Lowe’s is actively managing its capital. The company is rationalizing its capital expenditures Incorporatedluding store-remerchandising efforts, to improve its return on investment. We appreciate its approach of cutting new store growth targets in the weak consumer environment.

Given the bleak economic outlook, we believe that spending on remodeling projects will likely remain on hold until the housing market stabilizes and consumer-spending rebounds. Comparable-store sales may also remain weak in the near future until the housing sector steadies and inventory levels normalize.

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