Shares of the home improvement chain rose 2% to $261.70 in early trading as the company also updated its annual sales forecast, reporting better-than-expected profits for the second quarter. This positive news reflects the growing confidence in the market, prompting investors to take notice.
The urgency for acquisitions within the pro distributors market is intensifying, according to J.P. Morgan analyst Christopher Horvers. In a recent note, he emphasized that this trend will likely be a key focus area as competition in the home improvement sector heats up. The strategic moves made by companies like Lowe’s and Home Depot are indicative of this escalating urgency.
California-based Foundation Building Materials (FBM) plays a significant role in the construction supply chain. The company provides essential construction products, including drywall, metal framing, ceilings, doors, and hardware, to approximately 40,000 professional customers across more than 370 locations in the U.S. and Canada. This extensive network is a testament to FBM’s robust market presence.
Lowe's CEO Marvin Ellison highlighted that FBM's scalable, multi-trade distribution platform, along with its strong leadership, is set to significantly enhance the company's offerings for professionals. The recent acquisition of ADG (Artisan Design) further supports this strategy, positioning Lowe’s to better serve its professional customer base.
In contrast, Home Depot opted to maintain its annual forecasts unchanged, banking on continued consumer spending on smaller-scale maintenance projects and sustained demand from professional contractors in the latter half of the year. This cautious approach reflects the company's assessment of market trends and consumer behavior.
Lowe's plans to finance the acquisition of FBM through a combination of short-term and long-term debt. The deal is anticipated to close in the fourth quarter of 2025, pending regulatory approvals. This strategic acquisition is expected to bolster Lowe’s position in the competitive home improvement landscape.
Furthermore, the company has revised its total annual sales expectations, projecting a range of $84.5 billion to $85.5 billion, an increase from its previous forecast of $83.5 billion to $84.5 billion. The recent financial results showed that Lowe's earned $4.33 per share on an adjusted basis during the quarter, surpassing analysts' estimates of $4.24, according to data compiled by LSEG.
In conclusion, Lowe’s proactive approach in acquiring Foundation Building Materials, coupled with its optimistic sales forecast, positions the company favorably in a competitive market. As the urgency for acquisitions rises in the home improvement sector, stakeholders will be keenly watching how these developments unfold.
