Buy Home Depot (HD) or GMS (GMS) Stock After Acquisition Announcement?

Aiming to expand its reach to professional contractors, Home Depot HD announced it will be acquiring GMS Inc. GMS for $4.3 billion or $5.5 billion when including debt.

As a distributor of wallboard and suspended ceiling systems, GMS will strengthen Home Depot’s position in the specialty building products space with the deal expected to close by the end of the year or early 2026.

HD & GMS Stock Performance

Notably, the acquisition announcement caused GMS stock to spike +11% on Monday, with HD shares slightly down. Year to date, GMS is up nearly +30% to impressively top the S&P 500’s +5% and HD at -4%. Over the last three years, GMS is now sitting on gains of +140% to widely edge the broader market’s return of +64% and HD at +34%.

Home Depot’s Distribution Expansion

Most importantly, to Home Depot’s portfolio, acquiring GMS would enhance fulfillment and service options for residential and commercial professional contracting customers. This will also keep Home Depot ahead of Lowe's (LOW) in regard to serving professional contractors by bolstering its acquisition of SRS Distribution, which it acquired for $18.25 billion last year, boosting the home improvement retail leader's footprint in terms of building products for roofing, landscaping, and pool supplies.

Seen as a major step in Home Depot’s push to become a multi-category building materials distributor, it’s noteworthy that GMS CEO John C. Turner Jr. and his leadership team will continue to lead the company under the SRS umbrella.

Home Depot & GMS Outlook

Based on Zacks' estimates, GMS’s total sales are expected to be virtually flat in its current fiscal year 2026 but are projected to rise 3% in FY27 to $5.68 billion. GMS’s probability is very intriguing, with annual earnings currently slated to be up 2% in FY26 and forecasted to pop another 17% in FY27 to $7.42 per share.

Pivoting to Home Depot, its top line is expected to expand 3% in its current FY26, with total sales projected to increase another 4% in FY27 to $171.66 billion. Home Depot’s EPS is expected to dip 1% in FY26 but is projected to rebound and spike 9% in FY27 to $16.41.

Bottom Line

Home Depot stock currently lands a Zacks Rank #3 (Hold) with GMS shares sporting a Zacks Rank #2 (Buy). From a long-term perspective, the acquisition of GMS should significantly boost Home Depot’s top and bottom lines by expanding its presence as a building materials distributor.

However, there could be better buying opportunities ahead for Home Depot stock when considering its recent acquisition costs from GMS and SRS, respectively. That said, the acquisition stock price for GMS of $110 per share still offers 1% upside and may provide buy-the-dip scenarios if there is a sharp selloff below this target.

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This article originally published on Zacks Investment Research (zacks.com).

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