Office Depot, Inc. (ODP), the supplier of a range of office products and services, is slated to report its third-quarter 2014 results on Nov 4, 2014. In the last quarter, it posted in-line earnings. Let’s see how things are shaping up for this announcement.
Factors Affecting This Quarter
The office supplies industry continues to face secular headwinds. In addition, demand for office products has been curbed by the latest technological advancements. Smartphones, tablets and laptops are fast emerging as viable substitutes for paper-based office supplies.
To combat odds, Office Depot merged with Office Max and took a rational approach to return to profitability by focusing on cost containment, closing underperforming stores, introducing smaller format stores, bringing more innovative products under their ambit and taking eCommerce initiatives. Though the company has started to benefit from the synergies, it will take some time for things to normalize.
Earnings Whispers
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, 2 or 3 for this to happen. This is not the case here, as you will see below.
Zacks ESP: Earnings ESP for Office Depot is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 9 cents.
Zacks Rank: Office Depot carries a Zacks Rank #2 (Buy). Though a favorable Zacks Rank increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into an earnings announcement, especially when the company is witnessing negative estimate revisions.
Stocks That Warrant a Look
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:
CST Brands, Inc. (CST) has an Earnings ESP of +8.93% and a Zacks Rank #2.
The Walt Disney Company (DIS) has an Earnings ESP of +3.41% and a Zacks Rank #2.
Archer-Daniels-Midland Company (ADM) has an Earnings ESP of +2.60% and a Zacks Rank #3 (Hold)
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