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.
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HD Supply Looking To Potentially Play Multiple Trump