You Down With ODP? Office Depot Likely To Report An In-Line Q4

Loop Capital’s Anthony Chukumba expects Office Depot Inc ODP to report an in-line fourth-quarter result on March 1 and issue a conservative forecast for 2017.

Analyst Commentary

Chukumba, who reiterates Hold rating on the stock, believes investors will primarily focus on trends in NA Retail same-store sales, NA Business Solutions, and recently appointed CEO Gerry Smith's strategic plan.

“We would not be surprised to see Office Depot outline very conservative 2017 guidance given the fact recently appointed CEO Gerry Smith's first day on the job will be two days before the earnings release,” Chukumba wrote in a note.

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Chukumba expects fourth quarter and 2017 EPS estimates of $0.10 and $0.46, in line with consensus, and would represent 37.3 percent and 21.2 percent year-over-year growth, respectively.  

The analyst also projects revenue of $2.578 billion for the fourth quarter and $10.205 billion for 2017. Consensus estimate calls for revenue of $2.71 billion for the quarter and $10.37 billion for 2017.

The analyst’s forecast assumes continued weakness in NA Retail same store sales and a flat operating margin, coupled with sequential top-line growth and year-over-year profitability improvements in NA Business Solutions.

What Could Change The Analyst's Rating?

Meanwhile, Chukumba said he would become more positive on the stock if the company shows sequential improvement in NA Retail same-store sales and Business Solutions trends and retail profitability, coupled with significant progress on the recently resumed OfficeMax integration.

At last check, shares of Office Depot were down 0.80 percent to $4.36. Chukumba has a price target of $5.