Why Home Depot shares fell today

Shares of DIY store (NYSE: HD) ended lower today as investors appeared to give a positive impression of the deal to buy SRS Distribution, a leading specialist trading company that will help the company expand its presence in the professional market.

The stock closed 4.1% lower.

Image source: Home Depot.

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Home Depot is making a big move

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

The move will expand Home Depot’s addressable market by an estimated $50 billion, but the company said it will suspend share buybacks until it returns to its target debt load of twice earnings before interest, taxes, depreciation and amortization.EBITDA).

SRS will give Home Depot a stronger presence among its Pro customer, an area where it typically has an advantage over competitors Lowe’s. CEO Ted Decker said, “SRS is an industry leader with a proven track record of profitable growth across all verticals.”

SRS brings Home Depot resources, including more than 2,500 professional salespeople, more than 760 locations nationwide and a truck fleet of more than 4,000, in addition to a healthy business serving the professional market.

Why investors don’t seem to like it

Most Wall Street analysts weighing in on the deal had positive comments, but investors appear to dislike the pause on share buybacks and are skeptical of the deal at a time when Home Depot’s valuation is high and the home improvement market continues to face challenges due to a sluggish housing market.

The deal is certainly a risk for Home Depot and represents the company’s first big move under CEO Ted Decker. However, if it can successfully integrate SRS, the deal should pay off in the long run…

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