We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
HD Supply to Sell White Cap Unit to Clayton, Dubilier & Rice
Read MoreHide Full Article
HD Supply Holdings, Inc. announced that it entered a contract with private equity firm Clayton, Dubilier & Rice, for the divestment of its Construction & Industrial business segment (“White Cap”). The aforementioned deal, which is expected to be completed in October 2020, conditioned on certain regulatory approvals, is valued at $2.9 billion in cash.
White Cap is primarily engaged in distributing specialty hardware, material, tools and safety supplies to concrete and general contractors in North America. Notably, HD Supply previously intended to separate its White Cap business into an independent publicly-traded company.
The company noted that the divestment transaction will enable it to concentrate more on its Facilities Maintenance business segment. Also, it anticipates achieving net proceeds of $2.5 billion from the transaction, which it intends to utilize on rewarding its shareholders apart from funding its acquisition programs and repaying debt.
Existing Business scenario
HD Supply’s hospitality business, which accounts for a significant portion of Facilities Maintenance sales, is experiencing a soft demand environment amid the coronavirus outbreak. The company expects the business to have the longest path of recovery compared to its other businesses. Also, its non-hospitality businesses are witnessing weaknesses across their end-markets.
Also, the company has been witnessing a shift in customer demand toward low-ticket products like hand sanitizer and protective masks, owing to the pandemic. Although its order volume remains strong, its average order size has dropped significantly as demand for higher-ticket items such as HVAC and appliances declined.
In addition, a highly leveraged balance sheet can be detrimental to HD Supply's profitability. Notably, exiting the first quarter of fiscal 2020, its long-term debt, excluding current installments, remained high at $2,033 million.
However, signs of recovery in living space MRO and specialty construction markets bode well for the company. In addition, the Facilities Maintenance segment has been benefiting from higher demand for its healthcare products.
The Zacks Rank #4 (Sell) company’s shares have gained 0.9% compared with 9.1% growth recorded by the industry in the past six months.
AGCO delivered an earnings surprise of 409.54%, on average, in the trailing four quarters.
Graphic Packaging delivered an earnings surprise of 16.53%, on average, in the trailing four quarters.
Berry Global delivered an earnings surprise of 16.34%, on average, in the trailing four quarters.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?
Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Image: Bigstock
HD Supply to Sell White Cap Unit to Clayton, Dubilier & Rice
HD Supply Holdings, Inc. announced that it entered a contract with private equity firm Clayton, Dubilier & Rice, for the divestment of its Construction & Industrial business segment (“White Cap”). The aforementioned deal, which is expected to be completed in October 2020, conditioned on certain regulatory approvals, is valued at $2.9 billion in cash.
White Cap is primarily engaged in distributing specialty hardware, material, tools and safety supplies to concrete and general contractors in North America. Notably, HD Supply previously intended to separate its White Cap business into an independent publicly-traded company.
The company noted that the divestment transaction will enable it to concentrate more on its Facilities Maintenance business segment. Also, it anticipates achieving net proceeds of $2.5 billion from the transaction, which it intends to utilize on rewarding its shareholders apart from funding its acquisition programs and repaying debt.
Existing Business scenario
HD Supply’s hospitality business, which accounts for a significant portion of Facilities Maintenance sales, is experiencing a soft demand environment amid the coronavirus outbreak. The company expects the business to have the longest path of recovery compared to its other businesses. Also, its non-hospitality businesses are witnessing weaknesses across their end-markets.
Also, the company has been witnessing a shift in customer demand toward low-ticket products like hand sanitizer and protective masks, owing to the pandemic. Although its order volume remains strong, its average order size has dropped significantly as demand for higher-ticket items such as HVAC and appliances declined.
In addition, a highly leveraged balance sheet can be detrimental to HD Supply's profitability. Notably, exiting the first quarter of fiscal 2020, its long-term debt, excluding current installments, remained high at $2,033 million.
However, signs of recovery in living space MRO and specialty construction markets bode well for the company. In addition, the Facilities Maintenance segment has been benefiting from higher demand for its healthcare products.
The Zacks Rank #4 (Sell) company’s shares have gained 0.9% compared with 9.1% growth recorded by the industry in the past six months.
Stocks to Consider
Some better-ranked stocks are AGCO Corporation (AGCO - Free Report) , Graphic Packaging Holding Company (GPK - Free Report) and Berry Global Group, Inc. (BERY - Free Report) . While AGCO sports a Zacks Rank #1 (Strong Buy), Graphic Packaging and Berry Global carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AGCO delivered an earnings surprise of 409.54%, on average, in the trailing four quarters.
Graphic Packaging delivered an earnings surprise of 16.53%, on average, in the trailing four quarters.
Berry Global delivered an earnings surprise of 16.34%, on average, in the trailing four quarters.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?
Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2020 today >>