Office Depot (ODP) to Report Q4 Earnings: What to Expect?

Office Depot, Inc. ODP, the leading supplier of various office products and services, is slated to report fourth-quarter 2016 results, before the opening bell on Mar 1. The question lingering in investors’ minds now is, whether the company will be able to post positive earnings surprise in the quarter to be reported. Office Depot has underperformed the Zacks Consensus Estimate in three of the trailing four quarters, with an average miss of 25.7%. Let’s see how things are shaping up prior to this announcement.

Office Depot forms part of the Retail-Wholesale sector. As per the latest Earnings Preview, total earnings for the sector are expected to decline marginally by 1.2%, while revenue is projected to improve 4.7%. We observed that the Retail-Wholesale sector has lagged the broader market in the past six months. While the Zacks categorized sector rose 2.6%, the S&P 500 index advanced 7.5%, over the said time frame.

Which Way are Estimates Treading?

Let’s look at earnings estimate revisions in order to get a clear picture of what analysts are thinking about the company right before earnings release. We note that the estimates have been stable over the past 30 days. The Zacks Consensus Estimate of 10 cents for the fourth quarter is pegged higher than 7 cents delivered in the year-ago quarter. However, the Zacks Consensus Estimate of 41 cents for 2016 remains flat on a year-over-year basis. In addition, analysts polled by Zacks expect revenues of $2.74 billion, down nearly 21% from the prior-year period.

What Does the Zacks Model Show?

Our proven model does not conclusively show that Office Depot is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Office Depot, Inc. Price, Consensus and EPS Surprise

 

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

Office Depot has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 10 cents. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Moreover, the company has a Zacks Rank #4 (Sell). Please note that we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Factors at Play

Office Depot has exhibited a bearish run in the past 12 months. The stock declined 13.8%, while the Zacks categorized Retail – Miscellaneous/Diversified industry gained 6.8%.

Persistent weakness in the office products sector, technological advancements and stiff competition from online retailers are weighing on the company’s performance. In addition, the company continues to battle a dismal top line that missed the Zacks Consensus Estimate for the ninth consecutive quarter, when it reported third-quarter 2016 results. Additionally, the same declined 7% on a year-over-year basis. Going ahead, management expects total sales to be lower in fourth-quarter 2016 versus 2015 due to store closures, business disruption owing to merger related issues and tough market conditions.

Nevertheless, management has undertaken a strategic review of business operating model, growth prospects and cost structure to bring itself back on the growth trajectory. We believe these endeavors may take time but are likely to reap benefit, moving forward.

Stocks Poised to Beat Earnings Estimates

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

Burlington Stores, Inc. BURL has an Earnings ESP of +1.18% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Best Buy Co., Inc. BBY has an Earnings ESP of +1.81% and a Zacks Rank #3.

Costco Wholesale Corporation COST has an Earnings ESP of +0.74% and a Zacks Rank #3.

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Best Buy Co., Inc. (BBY): Free Stock Analysis Report
 
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