Home Depot Inc.

Our stable rating outlook on Home Depot reflects our expectation for solid credit metrics, with EBITDA margins in the 16% area and adjusted debt to EBITDA below 2x. While leverage could be better than our forecast for the next year, we see the company resuming shareholder initiatives to manage leverage within its stated targets. We could lower the rating if the company's financial policy becomes more aggressive, or if competition intensifies and operating performance stumbles in the face of soft demand. We would also lower the rating if leverage remains above 2x, which we estimate could occur if our adjusted 2020 EBITDA drops by about 15% while adjusted debt remains flat. Given our expectation that the company will continue to

...We expect solid operating performance in the near term, with moderating revenue growth in 2021. Home Depot Inc. reported comparable sales of 23% in second quarter 2020 despite the recessionary environment caused by efforts to contain the spread of Covid-19. As homes became a shelter-in-place refuge, an office for employees, and a remote learning classroom, we saw a significant surge in demand for home improvement-related products that we would not expect during a typical economic slowdown. While we believe these demand trends will moderate in 2021 on normalized spending for repair and remodeling activities, Home Depot should continue to generate favorable sales and profit growth in our view. Home Depot's market-share gains will continue due to its business strategies, in our view. This is the third year of the company's $11 billion investment-spending program to position itself as a "One Home Depot," which it expects to provide a seamless experience across the different sales channel. Its...

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