Home Depot Stock Dips in Trading Today

Home Depot Stock Dips in Trading Today

Actions of Home deposit (NYSE:HD) finished lower today as investors appeared to reject its deal to buy SRS Distribution, a leading specialty retail company that will help it expand its presence in the professional market.

The stock closed down 4.1%.

Home Depot Stock Dips in Trading Today

Image source: Home Depot.

Home Depot takes a big step forward

Home Depot will acquire SRS Distribution for $18.25 billion, including debt, and will pay for the deal with its cash in the form of debt.

The move will expand Home Depot’s addressable market by about $50 billion, but the company said it would suspend stock buybacks until it returns to its two-times debt leverage target earnings before interest, taxes, depreciation and amortization (EBITDA).

SRS will give Home Depot a stronger presence with its Pro customer, an area where it typically has an advantage over its rival. Lowes. CEO Ted Decker said: “SRS is an industry leader with a proven track record of profitable growth across all verticals. »

SRS brings Home Depot’s assets, including a sales force of more than 2,500 professionals, more than 760 branches across the country and a truck fleet of more than 4,000 people, in addition to a healthy business serving the professional market.

Why investors don’t seem to like it

Most Wall Street analysts who have weighed in on the deal have offered positive comments, but investors appear to hate the pause in stock buybacks and are skeptical of the deal at a time when Home Depot’s valuation is high and where the home improvement retail market still faces challenges due to a sluggish real estate market.

The deal certainly represents a risk for Home Depot and represents the company’s first major move under CEO Ted Decker. However, if it succeeds in integrating SRS, the deal should pay off in the long run.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool posts and recommends Home Depot. The Motley Fool recommends Lowe’s Companies. The Motley Fool has a disclosure policy.

Why Home Depot Stock Fell Today was originally published by The Motley Fool

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