UPDATE: Piper Jaffray Lowers Its PT On Office Depot Following Earnings

Piper Jaffray is maintaining its Neutral rating but decreasing the PT from $7 to $6 following the Q4 earnings call. Office Depot ODP fell short of Piper's and consensus sales expectations by reporting Q4 sales of $2.962B but topped on EPS of $0.09 vs. Piper's and consensus of ($0.03). It continues to remain guarded about current unemployment levels and the recovery of state and local government spending. For Q1, ODP estimates that NA Retail will achieve comps and operating profit down from last year and that BSD will achieve a sales decline similar to Q4 and lower operating profit y/y. The company also expects International sales in constant currency to be down y/y and operating profit to be slightly lower. As a result Q1 total company sales are expected to be down 3% and EBIT down as well due to winter weather difficulties, higher marketing expenses, investments to drive service offering growth and business process improvements across the company. Based on Q4 results and management's limited discussion of Q1, Piper is decreasing its Q1 revenue and EPS estimates. Piper believes Q1 revenue will be $3B and EPS will be $0.06. It believes these results will be driven by a +15bps increase in gross margin y/y, and total operating deleverage of 80bps due to increased marketing costs and investments resulting in an operating margin of 1.2%. ODP closed Tuesday at $5.49