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Factors to Know Ahead of Office Depot's (ODP) Q3 Earnings

Zacks Equity Research

Office Depot, Inc. ODP is slated to release third-quarter 2019 results on Nov 6. In the preceding four quarters, this provider of business services and supplies, products and technology solutions outperformed the Zacks Consensus Estimate by average of 19.4%. In the last reported quarter, the company delivered a positive earnings surprise of 40%.

The Zacks Consensus Estimate for third-quarter earnings is currently pegged at 14 cents, which indicates an improvement of 7.7% from the year-ago quarter figure. We note that the Zacks Consensus Estimate has remained stable in the past 30 days. The Zacks Consensus Estimate for revenues is pegged at $2,830 million, suggesting a decline of about 2% from the prior-year period.

Key Factors to Note

Office Depot has been focusing on business operating model, viable projects and cost structure, and making incremental investments to increase the revenue contribution from services. It has been concentrating on enhancing e-commerce platforms, increasing penetration into adjacent categories and providing innovative products. Cumulatively, these are likely to contribute to third-quarter results. Notably, the company’s Business Solutions Division has been a performing well, a trend that is likely to have continued in the third quarter.

However, softness across CompuCom and retail divisions has been a concern. We note that the company’s retail division has been witnessing dismal comparable-store sales for a while now. Persistence of such performance across both these divisions is likely to get reflected on the company’s top line number in the third quarter.

Nonetheless, the company’s bottom line is likely to benefit from Business Acceleration Program that involves reducing costs, improving operational efficiencies, enhancing service delivery, effective use of technology and automation and identifying strategic investment opportunities.

Office Depot, Inc. Price, Consensus and EPS Surprise

 

Office Depot, Inc. Price, Consensus and EPS Surprise
Office Depot, Inc. Price, Consensus and EPS Surprise

Office Depot, Inc. price-consensus-eps-surprise-chart | Office Depot, Inc. Quote

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What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for Office Depot this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Office Depot carries a Zacks Rank #3 and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With Favorable Combination

Here are companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Lowe's Companies LOW has an Earnings ESP of +1.25% and a Zacks Rank of #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

AutoZone AZO has an Earnings ESP of +0.77% and a Zacks Rank #3.

Target TGT has an Earnings ESP of +5.62% and a Zacks Rank #3.

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