Office Depot, Inc. (ODP - Free Report) is slated to release second-quarter 2019 results on Aug 7. This provider of business services and supplies, products and technology solutions has outperformed the Zacks Consensus Estimate in the trailing four quarters, with an average positive earnings surprise of 15.6%. In the last reported quarter, the company delivered a positive earnings surprise of 16.7%.
The Zacks Consensus Estimate for the quarter under review is pegged at 5 cents, which is line with the prior-year quarter reported figure. We note that the Zacks Consensus Estimate has been stable in the last 30 days. The Zacks Consensus Estimate for revenues stands at $2,587 million, indicating a decline of about 1.6% from the year-ago quarter.
Factors Holding Key to Performance
Office Depot has been making concerted efforts to give itself a complete makeover in an environment where demand for office products (paper-based) has shrunk owing to technological advancements. The company has been focusing on business operating model, viable projects and cost structure. The company is also making incremental investments to catapult it into a product and services-driven enterprise.
The performance of CompuCom division holds key to the company’s quarterly results. In the last reported quarter, lower-than-expected operating performance at the CompuCom division took a toll on sales and operating income. Additionally, the company’s retail division has been witnessing dismal comparable-store sales for a while now. If Office Depot witnesses similar performance across both these divisions in the to-be-reported quarter, the company’s top line may come under pressure.
Nevertheless, the company has been concentrating on e-commerce platforms, focusing on providing innovative products and services and exploring options to speed-up cross-selling opportunities. Office Depot’s initiative of buy online and pick up in-store is also gaining traction.
Management also initiated Business Acceleration Program that involves reducing costs, improving operational efficiencies, enhancing service delivery, effective use of technology and automation and identifying strategic investment opportunities. Moreover, in order to control discretionary spending, the company adopted zero-based budgeting approach. These are likely to favorably impact the to-be-reported quarter.
What Does the Zacks Model Unveil?
Our proven model does not conclusively show that Office Depot is likely to beat bottom-line 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Office Depot has a Zacks Rank #3 and an Earnings ESP of 0.00%, consequently making the surprise prediction difficult.
3 Stocks With a Favorable Combination
Here are three companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:
The Children's Place (PLCE - Free Report) has an Earnings ESP of +47.06% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
L Brands (LB - Free Report) has an Earnings ESP of +0.89% and a Zacks Rank #3.
Ross Stores (ROST - Free Report) has an Earnings ESP of +0.89% and a Zacks Rank #3.
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