Earnings Preview: Office Depot - Analyst Blog
October 29 2012 - 10:30AM
Zacks
Office Depot
Inc.(ODP)– one of the leading suppliers of office products
and services across the globe – is expected to report its third
quarter 2012 financial results on Tuesday, October 30, 2012.
The current Zacks Consensus
Estimate for the quarter stands at 1 cent per share, which is above
the break-even earnings reported in the comparable prior-year
period. Revenue, as per the Zacks Consensus Estimate, is pegged at
$2,731 million.
Last Quarter
Recap
Office Depot posted second-quarter
2012 results with a loss of 14 cents a share that sharply widened
from a loss of 6 cents delivered in the year-ago quarter, and also
fared worse than the Zacks Consensus Estimate of a loss of 9 cents.
The dismal results were due to weak top-line performance on account
of soft sales in North America and Europe.
The company’s total revenue of
$2,507.2 million decreased 7% from the prior-year quarter and also
fell short of the Zacks Consensus Estimate of $2,584 million. In
constant currency, revenue slipped 5%.
Agreement of Estimate
Revision
For the to-be-reported quarter, the
estimates remain unchanged with no estimate going up or down (out
of 14) over the last 30 days or 7 days. Furthermore, the story
remains the same for fiscal 2012. The estimates were kept intact
mainly due to lack of news or event, which could have a direct or
indirect impact on these.
Magnitude of Estimate
Revision
For the third quarter 2012, the
estimate remains stagnant at 1 cent per share over the last 7 or 30
days, mainly due to the absence of estimate revision, whereas for
2012, the estimate remained unchanged at a loss of 3 cents over the
last 7 or 30 days.
Mixed Earnings Surprise
History
With respect to earnings surprise,
Office Depot has missed the Zacks Consensus Estimate in two
quarters over the last four quarters, whereas the estimates met and
surpassed in one quarter each. The average remained at a negative
of 77.8%.
Conclusion
Office Depot is containing costs,
closing underperforming stores, managing inventory and focusing on
providing innovative products and services, which should all
contribute to margin improvement. In order to increase store sales
productivity, the company is concentrating on remodeling and
introducing smaller format stores. However, we still remain
cautious about the macroeconomic environment, with small businesses
and consumers still remaining watchful on their spending.
As a result, we maintain our long
term ‘Neutral’ recommendation on the stock. However, Office Depot,
which competes with Staples Inc. (SPLS) and
OfficeMax Inc. (OMX), carries a Zacks #5 Rank,
implying a short-term ‘Strong Sell’ rating on the stock for the
coming 1-3 months, and reflects negative average earnings
surprise.
OFFICE DEPOT (ODP): Free Stock Analysis Report
OFFICEMAX INC (OMX): Free Stock Analysis Report
STAPLES INC (SPLS): Free Stock Analysis Report
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