How will the acquisition impact Home Depot’s earnings per share and operating margins over the next 12‑18 months?

Fundamental impact

The GMS purchase adds a proven specialty‑distribution platform that should generate roughly $130‑$150 million of incremental pre‑tax profit in 2025‑26 (≈ $1.0‑$1.2 billion of revenue at a 13‑14% EBIT margin). Because the deal was executed through SRS — a cash‑generating subsidiary — the financing cost is modest (mainly net‑debt assumed). Consequently, Home Depot’s diluted earnings per share (EPS) is expected to be up‑trend‑weighted by 3‑5 cents over the next 12‑18 months, on top of the FY‑24 FY‑25 guidance already in place. The operating‑margin profile will be mixed in the near term: the GMS profit mix sits at a slightly lower margin than Home Depot’s core‑store business, which will modestly drag the consolidated margin down (≈ 30 bps) for the first half‑year after close. By Q4‑26 the upside‑side synergies (cross‑selling, consolidated logistics, and SG&A rationalisation) should lift the combined operating margin to ~2‑3 percentage‑points above the pre‑acquisition level.

Market / technical overlay

The transaction was announced with the typical “accretion” narrative; the stock has already re‑priced the deal premium, holding just shy of the 200‑day moving average (~ $330) and testing the $310‑$320 support zone on lower‑than‑average volume. A breakout above $330 with volume above the 20‑day average could confirm the market’s belief that the margin‑improvement timeline will accelerate, opening the door for a short‑term pull‑back to the $310‑315 range (a buying opportunity for traders with a 6‑month horizon). Conversely, any indication that integration costs rise or that GMS margins deteriorate could pressure the stock back toward $295‑$300, where the 50‑day moving average and recent low‑bounce bounce sit.

Actionable view

• Long‑term holders: The acquisition is an EPS‐positive, margin‑enhancing catalyst. Maintain a core position; the incremental 3‑5 cents EPS accretion and ~2 % margin lift justify a modest upside over the next 12‑18 months.
  
• Short‑term traders: Look for a buy on dip at $310‑$315 (near the 20‑day SMA) with a stop just below $300. Target the $340‑$350 range as the market digests the Q4‑26 margin synergies.
  

Overall, the deal should be a modest, positive earnings driver with an initially small margin compression that reverses into a clear operating‑margin boost by the second half of 2026.