Home Depot's first quarter results were met with a negative market reaction as profitability came in slightly below expectations despite better-than-anticipated revenue growth. Management attributed the revenue gain to increased customer engagement in smaller home improvement projects and strong activity in Pro-heavy categories such as building materials and outdoor products. However, the quarter was challenged by continued softness in large-scale remodeling projects, which are more sensitive to higher interest rates. CEO Ted Decker described the business as "well-positioned" but acknowledged that elevated rates continue to limit demand for major renovations, and operating margin declined year over year due in part to the SRS acquisition and higher expenses.
While the macro environment is undoubtedly challenging, shares have been overly punished, said Needham, as customers in the U.S. become more cautious about their buying behaviour due to President Donald Trump’s tariffs.
Barclays, Baird, and Loop Capital have raised their price target on GMS to $110 as the deal with Home Depot gives the building products distributor a chance to revive earnings amid residential and commercial demand pressure
Shares of building materials distributor GMS (NYSE:GMS) jumped 11.7% in the afternoon session after the company announced it had agreed to be acquired by The Home Depot's subsidiary, SRS Distribution. The all-cash deal values the specialty building products distributor at $110.00 per share, for a total enterprise value of approximately $5.5 billion.
The Home Depot Inc. is acquiring GMS Inc. for $4.3B, expanding its reach in the pro contractor space and adding to its capabilities and service offerings.
