Lowe's (LOW) is facing "constrained" earnings growth as weak DIY discretionary demand continues to weigh on results amid a challenging housing market backdrop, BofA Securities said in a report Thursday.

The firm noted that Q1 comparable sales rose 0.6%, supported by strength in professional customers, appliances, online sales and home services, while discretionary DIY demand lagged.

Lowe's Q2 earnings per share guidance, which calls for a 2% year-over-year decline, reflects incremental operating margin pressure from higher transportation costs and investments in promotions, marketing and fulfillment offers, the report said.

BofA said "productivity initiatives" will likely help offset higher transportation costs in the second half of the year and that it is modeling an improvement in transaction trends during that period. But the analysts said their forecasts are "drifting toward" the low end of management's guidance range absent an improvement in housing fundamentals, according to the report.

BofA reiterated a neutral rating on Lowe's and lowered its price target to $257 from $260. It also lowered its fiscal 2026 and 2027 EPS estimates to $12.33 and $12.84, respectively, citing weaker Q2 sales and margin expectations.

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