Bank of America Securities believes Lowe's 2026 profit outlook is becoming easier to forecast, even as the home improvement retailer heads into a fiscal third quarter where earnings are expected to decline.
In a research note released Tuesday, the investment bank said Lowe's updated fiscal 2026 guidance, provided in August, gives investors a clearer picture of the company's earnings trajectory for the coming year. However, for the near term, BofA estimates that Lowe's fiscal Q3 earnings per share will fall 7% year over year when the company reports results on November 18.
What's driving the expected decline?
The anticipated drop in third-quarter earnings reflects ongoing softness in the home improvement market. High mortgage rates and elevated prices for existing homes have kept many homeowners from moving or undertaking major renovation projects, which has pressured demand for big-ticket items like appliances, lumber, and tools.
Lowe's, like its main rival Home Depot, has been navigating a period of reduced consumer spending on discretionary home projects. While the company has maintained its market share and managed costs, the broader slowdown in housing-related activity has weighed on sales and profitability.
Tariff refunds could provide a boost
One potential bright spot, according to BofA, is the possibility of tariff refunds. The bank estimates that these refunds could add roughly $0.53 per share to Lowe's earnings. This likely relates to duties the company paid on imported goods—many of which were subject to tariffs imposed during the previous administration—that may now be recoverable through legal or administrative processes.
If realized, such a refund would be a one-time benefit rather than a recurring source of profit. Still, it could cushion the earnings decline and provide some upside to the company's reported results.
Why the 2026 outlook matters
BofA's commentary suggests that Lowe's management has provided enough detail in its fiscal 2026 guidance to reduce uncertainty for investors. A more predictable outlook is generally viewed positively, as it allows analysts and shareholders to model future performance with greater confidence.
This comes at a time when many companies are grappling with an uncertain economic environment. Interest rates, inflation, and consumer confidence remain volatile, and retailers have been cautious in their forecasts. Lowe's willingness to offer a clearer path for next year may signal that management sees a more stable demand environment ahead, even if the current quarter remains challenging.
What it means for investors
For everyday investors, the key takeaway is that Lowe's near-term earnings are expected to be weaker, but the longer-term picture may be improving. The 7% decline in Q3 EPS is a reminder that the home improvement sector is still working through a slowdown. However, the potential tariff refund and a more predictable 2026 outlook could provide support for the stock.
Investors should also consider that Lowe's is a cyclical company—its fortunes are closely tied to the housing market and broader economic conditions. When mortgage rates eventually fall and home sales pick up, demand for home improvement products could rebound. Until then, the company may continue to face headwinds.
It's also worth noting that BofA's view is just one analyst's perspective. Other firms may have different estimates, and actual results could vary. As always, it's important to look at a company's fundamentals, competitive position, and management commentary rather than relying on a single forecast.
Looking ahead
Lowe's will report its fiscal third-quarter results on November 18. Investors will be watching not only the headline earnings number but also any updates to management's outlook for the remainder of the year and into 2026. The company's commentary on consumer demand, housing market trends, and any tariff-related developments will be closely scrutinized.
In the meantime, the broader market continues to digest a mix of economic data and corporate earnings. For those interested in how other companies are navigating their own outlooks, recent reports from Maersk and Take-Two show that guidance updates can move stocks in either direction.
Ultimately, BofA's note highlights a common theme in investing: short-term pain can coexist with long-term optimism. For Lowe's, the next few months may be tough, but the company's clearer 2026 outlook suggests management sees better days ahead.
