Zacks Investment Research downgraded shares of Office Depot,Inc. (ODP) from OUTPERFORM to NEUTRAL on August 14, 2014, with a target price of $5.25.
Office Depot's store rationalization drive and subsequent increases in synergies expectations impressed us again. The company expects to generate $100 million in annual savings from store closures, up from $75 million projected earlier. Including these, management has raised merger synergies expectations by another $25 million to $700 million by 2016. The company's second quarter 2014 results also benefited largely from the merger. Revenues of $3,841 million did surpass the Zacks Consensus Estimate and loss per share of $0.02 came in line. We perceive that though the company efforts in respect of costs containment and enhancing online sales are in the right direction but the secular headwinds in the sector will provide considerable resistance. As evident from the pro forma revenue that slid 2%. Consequently, we downgrade our recommendation on the stock to Neutral.
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