Morgan Stanley analyst Simeon Gutman acknowledged that Lowe's reported "material, unanticipated" gross margin weakness in Q1 and revised its outlook for weaker gross margins in 2019. He thinks management has been hyper focused on top-line growth, to the detriment of margins, in the early stages of their transformation plan, but Gutman believes the gross margin weakness anticipated in 2019 is transitory. The margin issues overshadowed solid comps and expense leverage in Q1, contends the analyst, who said the margin setback does not change his Overweight thesis given his view that EPS should rebound next year. Gutman has a $123 price target on Lowe's shares.