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Home Depot's (HD) Compact Power Buy to Boost Rental Business

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The world’s leading home improvement retailer, The Home Depot Inc. (HD - Free Report) hasn’t really adopted a proactive stance when it comes to acquisitions. However, the company is not really wary of them either. After tasting success with the acquisition of Interline Brands and HD Supply Harware Solutions – also known as Crown Bolt in 2015, the company has inked a deal to buy Compact Power Equipment Inc., which provides equipment rental and maintenance services across the U.S.

Home Depot will pay cash of $265 million for the deal, which is expected to conclude by the end of second-quarter fiscal 2017.

Compact Power has been associated with Home Depot for a long time through its partnership that dates back to 2009. The journey which started off with three pilot equipment centers has grown to providing compact equipment rentals at more than 1,000 Home Depot stores across the U.S. and Canada. The company mainly provides short and long-term rentals for construction as well as landscape equipment to Home Depot’s Pro customers.

This acquisition is guided by Home Depot’s strategy of investing in capabilities that serve its core customers. With this acquisition, the company anticipates to improve customer experience through better equipment and tool rental offerings for both Pro and Do-It-Yourself customers. Further, the company remains keen on expanding Compact Power’s unique building services capabilities.

Though Home Depot’s stock did not react much to the news, it has outperformed the broader industry in the last three months. Most of the credit for this goes to consistent gains from improving customer experience, solid execution and consistent housing market recovery. Notably, shares of Home Depot have gained 2.6% in the last three months, outperforming the Zacks categorized Building Products – Retail industry’s dip of 0.7%.

Zacks Rank & Key Picks

Home Depot currently carries a Zacks Rank #3 (Hold). Meanwhile, investors interested in the space can count on better-ranked stocks like Beacon Roofing Supply, Inc. (BECN - Free Report) and Lumber Liquidators Holdings Inc. (LL - Free Report) , both carrying a Zacks Rank #2 (Buy). Further, investors can consider The Children’s Place Inc. (PLCE - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Beacon Roofing has a long-term EPS growth rate of 13.8%. Moreover, the stock has improved 8.7% in the last six months.

Lumber Liquidators, with long-term EPS growth rate of 27.5%, has grown 9.4% in the last three months.

Children’s Place, with long-term EPS growth rate of 8%, has increased nearly 3% in the last six months.

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