On Monday, Stifel, a financial services firm, adjusted its price target for Home Depot (NYSE:HD) shares, setting the new target at $380, up from the previous figure of $374. The firm sustained its Hold rating on the stock. The revision follows the completion of Home Depot's acquisition of SRS, which is expected to contribute significantly to the company's financials.
The SRS acquisition, which was finalized during the second fiscal quarter of 2024, is anticipated to add $10 billion in annualized revenue and over $1.1 billion in EBITDA for Home Depot.
Stifel's analyst predicts that Home Depot will provide more detailed information during the F2Q24 earnings release. However, the firm anticipates that the earnings per share (EPS) estimates will be challenging to gauge without explicit guidance from the company.
For the fiscal years 2024 and 2025, Stifel now projects Home Depot's EPS to be $15.04 and $15.75, respectively. These figures are a decrease from the earlier estimates of $15.26 for FY24 and $16.25 for FY25.
The adjusted estimates take into account the financial impact of the acquisition, including financing costs, reduced interest income, and do not include potential additional expenses from increased amortization.
The valuation of Home Depot's shares at a price target of $380 is derived by applying a multiple of 15 times the projected FY25 EBITDA. Stifel emphasizes that Home Depot's guidance for FY24 appears achievable and points out that the company is well-positioned to benefit from a comprehensive recovery in the home improvement market sector. The firm's outlook suggests a cautious optimism, acknowledging the volatile nature of market sentiment influenced by fluctuating interest rates.
In other recent news, Home Depot announced the termination of its $10 billion revolving credit facility, citing that it was no longer necessary. The company also reported earnings per share (EPS) estimates for FY1 and FY2 at $15.26 and $16.19 respectively. In other strategic moves, Home Depot acquired SRS, a residential specialty trade distributor, for $18.25 billion.
The company also announced Jordan Broggi's promotion to executive vice president of customer experience and president of online. In financial news, Home Depot declared a Q1 dividend of $2.25 per share for its shareholders, marking its 149th consecutive quarter of providing a cash dividend.
In terms of analyst notes, TD Cowen reduced its price target for Home Depot to $420 from $440, maintaining a Buy rating, while HSBC (LON:HSBA) revised its target to $318.00 from $323.00, maintaining a Reduce rating.
D.A. Davidson & Co. upgraded Home Depot to a "Buy" rating, with a price target of $395. These are the recent developments in Home Depot's business and financial performance.
InvestingPro Insights
As Home Depot (NYSE:HD) integrates its recent acquisition of SRS into its financial framework, the company continues to exhibit robust financial health with a market capitalization of $356.75 billion. With a consistent dividend increase over the past 14 years and a current dividend yield of 2.5%, Home Depot has demonstrated its commitment to shareholder returns, a factor not to be overlooked by investors. The company's ability to maintain dividend payments for an impressive 38 consecutive years underscores its financial stability and operational efficiency, reflected in a gross profit margin of 33.48% for the last twelve months as of Q1 2023.
Investors may find comfort in the company's low price volatility and its status as a leading player in the Specialty Retail industry. While Home Depot's stock is currently trading at a high price-to-book multiple of 196.02, it's important to note that analysts predict the company will remain profitable this year. Indeed, Home Depot has been profitable over the last twelve months, with a reported operating income of $21.22 billion. For those considering an investment, Home Depot presents a compelling case with its historical performance, offering a high return over the last decade.
For a deeper analysis and additional insights, including how the company operates with a moderate level of debt and the implications of trading at a high price-to-book multiple, investors can explore the full range of InvestingPro Tips by visiting: https://www.investing.com/pro/HD. There are 9 additional tips available on InvestingPro, providing a comprehensive look at Home Depot's financial metrics and industry position. To access these insights, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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