Zacks Investment Research downgraded shares of Office Depot, Inc. (ODP) from OUTPERFORM to NEUTRAL on January 14, 2015, with a target price of $8.30.
Merging with OfficeMax has been a shot in the arm for Office Depot resulting in higher synergies. After grappling with soft sales for a long time, the company's financial performance has started to improve, as reflected in its third-quarter fiscal 2014 performance and an encouraging operating income outlook thereafter. Adjusted earnings of $0.10 per share came a penny ahead of the Zacks Consensus Estimate while doubling from pro forma earnings of the prior-year quarter. On the other hand, although sales fell short of the Zacks' expectation, it surged 55% year-over-year. However, on a pro forma basis sales declined 3% in the quarter. Moreover, management's tepid sales forecast for the fourth quarter due to weakness in the sector as well as store closures make us cautious on the stock. Consequently, we downgrade our recommendation on the stock to Neutral.
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