Bank of America Securities analyst Robert F. Ohmes maintained a Buy rating on Home Depot ( HD ) with a price target of $450 on Tuesday.

Ohmes noted that Home Depot ( HD ) announced plans for SRS Distribution to acquire GMS Inc ( GMS ) for $110 per share or ~$4.3 billion (an implied EV of ~$5.5 billion).

The analyst said GMS is a leading distributor of specialty building products, including drywall, ceilings, and steel framing, in both residential and commercial markets.

Also Read: Home Depot’s Distribution Arm Expands With $5.5 billion GMS Deal

GMS reported 2024 sales of $5.5 billion and adjusted EBITDA of $615 million. The transaction is expected to close by the end of 2025. Given the timing and size of the deal (HD’s acquisition of SRS for $18.25 billion, closed in 82 days), Ohmes noted that the acquisition could close ahead of this timeline.

The analyst stated that the acquisition of GMS adds a new vertical (wallboard, ceilings, and steel framing) adjacent to SRS’ existing business (roofing, landscaping, and pools).

He expects the acquisition to complement SRS, given the overlap in customers and similar capabilities in wholesale distribution.

Notably, post-acquisition, GMS will report to Dan Tinker of SRS, who is very excited about this transaction (combined 1,200 locations and 8,000 trucks capable of tens of thousands of jobsite deliveries daily), Ohmes said.

The analyst expects GMS to grow organically and through targeted acquisitions under Home Depot’s ownership.

He said Home Depot ( HD ) expects the transaction to be accretive to adjusted EPS (excluding amortization expense) in the first year after close, excluding synergies.

Similar to SRS, Ohmes expects GMS to have an unfavorable mix impact on gross margin.

The analyst noted that Home Depot ( HD ) will finance the acquisition through cash on hand and debt.

Home Depot ( HD ) expects to return to a 2.0x leverage ratio by the end of fiscal 2026, after which Ohmes expects the company to resume share repurchases.

The analyst said Home Depot ( HD ) remains focused on maturing Pro capabilities to serve more complex projects, with SRS now managing the company’s trade credit program.

While the macro remains choppy, Ohmes expects Home Depot ( HD ) to continue gaining shares as it accelerates growth and capabilities with the complex Pro organically and inorganically.

Price Actions: HD shares are trading higher by 2.69% at $376.54 at last check Tuesday. GMS is up 0.15%.

Read Next:

Walmart Leverages Automation And AI To Cut Costs And Grow, Paving The Way For Other Retailers: Report