Home Depot's SRS Buy 'Strengthens Market Positioning': Analysts Predict Earnings Growth

Shares of Home Depot Inc (NYSE: HD) were falling on Monday, just days after the company announced the acquisition of SRS Distribution for $18.25 billion.

Wedbush On Home Depot

Analyst Seth Basham reiterated an Outperform rating, while raising the price target from $380 to $410.

The acquisition of SRS Distribution builds on Home Depot’s focus on driving residential pro sales growth, providing the company with “a well-established set of customer and supplier relationships, knowledgeable associates, an extensive footprint and solid breadth and depth of inventory with a solid acquisition track record to capitalize on the Complex Pro opportunity,” Basham said in a note.

The deal will allow Home Depot to “leverage SRS’ deep product catalog and distribution capabilities,” providing “an entry point to becoming a leading multi-trade distributor, increasing HD’s total addressable market by ~$50b to ~$1 trillion,” he added.
Check out other analyst stock ratings.

Telsey Advisory Group On Home Depot

Analyst Joseph Feldman maintained a Market Perform rating, while lifting the price target from $335 to $360.

“Home Depot expects the acquisition to be accretive to earnings in the first year post-close on a non-GAAP basis excluding synergies, but dilutive to earnings on a GAAP basis due to amortization expense,” Feldman wrote in a note. “We believe the acquisition of SRS strengthens Home Depot's market positioning and growth potential by helping better penetrate the complex Pro customer base,” he added.

Home Depot expects to exceed long-term annual sales growth of 3.0%-4.0% and earnings growth in mid- to high-single-digits as a result of the acquisition, the analyst further stated.

HD Price Action: Shares of Home Depot were down 2.94% to $372.33 at the time of publication Monday.

Now Read: US Manufacturing Activity Hits Highest Growth In 18 Months: 'Clear Signs Of Improving Conditions'

Photo: Shutterstock