Earnings Preview: Office Depot

Office Depot (ODP) is expected to report Q4 earnings Tuesday with a conference call scheduled for 9:00 a.m. ET.

Guidance

Analysts are looking for a profit of 19c on revenue of $3.83B. The consensus range is 6c to 30c for EPS, and revenue of $3.77B to $3.86B, according to Reuters. The company has said it expects EPS growth in the mid-teens for Q4 and that sales will remain challenged in Q108; Office Depot believes Q2 same store sales will be "close to flat." The company said its international sales are expected to grow in Q4 at a lower rate than the previous quarter, but should remain slightly positive in 1H08. Sales have slowed in recent months at office supply chains as small businesses have looked to cut spending. Other issues hampering sales include slower job growth, the credit crunch and a weak housing sector.

Analyst Views

JP Morgan, which holds an Overweight rating, on Office Depot shares, believes shares are "cheap" at current levels and the company has turnaround potential.

Analysts said the office products retailer is "at a crossroads as the company has 'miss-executed' during a concurrent period of deteriorating office supply trends." While the firm acknowledged that a difficult macroeconomic environment is partially to blame for Office Depot's difficulties, the analysts pointed out to several "self-inflicted" issues such as the company's rough integration of its Allied acquisition, the Securities and Exchange Commission's review of its accounting practices and the $370M in one-time charges incurred since the second half of 2005. Two scenarios that could maximize Office Depot's potential include management "gets its act together" or else management changes are "necessitated" through involvement of the company's board.

Comments

[foxyrich:]

this stock has dropped back every time recently that it has approached $15. Let's see what it can do this time.

2008 Feb 25 10:23 PM

[daffy:]

tomorrow we shall see. It sure would be nice to get out of the hole.

2008 Feb 25 10:26 PM