Home Depot Likely to See Long-Term Benefits From SRS Distribution Acquisition, UBS Says

MT Newswires Live06-22

Home Depot (HD) likely to see substantial long-term benefits from the addition of SRS Distribution, UBS Securities said in a note emailed Friday.

"We believe that the addition of SRS has the potential to be a transformative event for [Home Depot]. It can help usher in a new period in the company's development where it gains a larger share of the pro segment of the home improvement market," UBS said, adding that integrating SRS should enhance Home Depot's reach among professional customers.

While the acquisition initially dampens near-term earnings per share by around 2% for 2024, it is expected to be neutral to slightly beneficial by 2025, UBS said.

"We believe that this deal has the potential to enhance the company's long-term growth algorithm that currently stands at [3% to 4%] top-line growth and mid-to-high single digit (call it [6% to 8%]) EPS growth," UBS said.

The SRS acquisition offers Home Depot strategic benefits including market expansion, cost savings, growth opportunities, enhanced customer reach, and operational efficiencies while planning to maintain SRS as an independent entity and reducing leverage over the next 18 to 24 months.

UBS has a buy rating on Home Depot with a 12-month price target of $400.

Price: 354.58, Change: +1.14, Percent Change: +0.32

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