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Lowe's (LOW) beat first quarter earnings expectations, but the stock is under pressure as housing worries linger. Scott Mushkin, R5 Capital founder and CEO, joins Catalysts to explain why higher rates and tariff fears could weigh on Lowe's future demand.
To watch more expert insights and analysis on the latest market action, check out more Catalysts here.
Lowe's moving to the downside off about one and a half percent after topping first quarter earnings expectations and reaffirming the full year forecast. The home improvement retailer CEO saying investments in tech and inviting store environments helped offset near-term uncertainty and housing market headwinds. Joining us now, Scott Mushkin, R5 Capital founder and CEO, and you have a sell rating and a $220 price target on Lowe's. Talk me through the price action this morning because originally we saw a little bit of a move to the upside off of this earnings print that was better than feared, and now we're seeing this move to the downside following the call. What did investors hear that they didn't like?
I mean, I don't think they heard necessarily on the call anything they they didn't like. I mean, I think the business is kind of stuck in neutral. I think the concern, really, if you look at that 10-year bond, I mean, it's housing is again, kind of stuck. Um, and without housing getting a move on, it's kind of hard for Lowe's to have, yeah, good results. Same thing for Home Depot. I mean, both companies are managing well given, you know, given what's going on with the consumer but and in housing, but without the rates coming down, I I I think it's very hard for people to get excited about these these stocks.
Yeah, that that's Oh, sorry Scott, go ahead, go ahead.
No, I was just going to say then, of course, you have the tariff back around, the potential of recession. I mean, there's a lot there's a lot of overhang here.
Yeah, and it's a a great framework because it points to the fact that not a lot of this is necessarily in the executive suite's control. Is the bond market the key indicator for the share price of Lowe's going forward?
I I think it's a big indicator, uh, but I would also say macro, you know, besides the bond matters, the bonds matter a lot. The other thing I've been noting during this earning season, which our research and consulting business would actually disagree, we have a large consulting business. We actually think there has been pull forward of demand. So when you look at the results by month and, you know, Home Depot did better, uh, Lowe's did a little bit better in April. I, you know, you got, I think look at that with the idea some consumers were purchasing in anticipation of tariffs. So I think what our concern in the C-suite is they may be underestimating that, um, and that goes even for like Target, which is having a, you know, huge down day today. That we do feel like there was pull forward of demand.
