While the recent downturn hammered industrial-exposed distributors like MSC Industrial (NYSE:MSM), Fastenal (NASDAQ:FAST), and Grainger (NYSE:GWW), HD Supply (NASDAQ:HDS)
was more or less able to go about its business and continue growing.
Due to its much different end-market exposures (facilities maintenance,
water, and construction), HD Supply has continued to grow revenue and
expand its margins, leading to a meaningful outperformance over the last
three years relative to the likes of MSC, Fastenal, Grainger, and Wolseley (OTCQX:WOSYY) (with which it shares more in common).
Looking
ahead, even though non-residential construction seems to be slowing and
water infrastructure spending continues to click along at a slow pace
that frustrates its bulls, I think HD Supply could still have potential
catalysts to drive higher revenue and earnings. HD Supply would be a
meaningful beneficiary of a lower corporate tax rate and would likewise
be well-placed to benefit from the incoming administration's pledges to
significantly increase federal spending on infrastructure. Projecting
real numbers on the basis of campaign pledges is always a tricky
business, and I haven't changed my tax rate assumptions yet, but if this
administration delivers, it could support a fair value of $50 or higher
for this distributor.
Read more here:
HD Supply Looking To Potentially Play Multiple Trump
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