The Home Depot, Inc. (HD): Is This Market Still Building Shareholder Value?

One catalyst that could move this company’s prospects, and shares, higher is the proposed merger between it and competitor OfficeMax Inc (NYSE:OMX). At the closing of the merger, OfficeMax Inc (NYSE:OMX) shareholders are expected to receive almost 2.7 shares of the new Office Depot for every single share they hold.

Analysts expect significant synergies as a result of this merger, which could help both companies return to a much healthier position. In recent years, Office Depot Inc (NYSE:ODP)’s management has done a good job of streamlining the company’s core operations by cutting overlapping costs in many segments. This has helped the company in achieving higher EBIT margin trends. Adding cost savings and synergies resulting from the merger with OfficeMax Inc (NYSE:OMX), I believe this trend should improve further.

The recent announcement of the intended merger helped to, at least initially, raise the company’s share price. Since then, though, shares have dropped by roughly 25%. Should the FTC approve the merger, now may be a great opportunity to pick up highly discounted Office Depot Inc (NYSE:ODP) shares.

Just as with The Home Depot, Inc. (NYSE:HD), the economic factors of the past several years have caused the shares of Lowe’s and Office Depot to bounce back and forth like a proverbial ping pong ball. With this in mind, though, and as the economy re-emerges, solid sales and revenue should help to boost Home Depot’s share price value.

In addition, should the housing market continue on its upward glide, the prospects for rising dividends is also a good possibility. This could help to smooth investors’ ride should there be more market-related bumps along the road.

The bottom line

While Home Depot has an impressive record of beating quarterly earnings estimates, it projects its fiscal earnings for 2013 to grow by almost 12%, with comparable store sales expected to grow by almost 3%. This could pay off nicely for investors in terms of share price increase, along with a steady round of income while they wait.

The article Is The Home Improvement Market Still Building Value For Investors? originally appeared on Fool.com and is written by Nauman Aly.

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