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ODP Well-Positioned to Maintain Momentum This Year

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Zacks Equity Research
·4 min read
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The COVID-19 pandemic has altered, at least for the time being, the way we live, learn and work, and The ODP Corporation ODP through its product and services looks well poised to cater to the evolving demand stemming from such changes. The company leverages its direct supply chain, robust e-commerce platform and retail facilities to effectively serve customers at home or in office. Markedly, the company not only provides traditional office supplies, it also offers technology services, including device management and security among others.

Backed by such efforts this Zacks Rank #1 (Strong Buy) stock looks well poised as it enters the year 2021. Markedly, shares of this Boca Raton, FL-based company has surged 26% in the past year, compared with the industry’s rally of 14.8%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Looking ahead, analysts are optimistic about the company. Remarkably, the Zacks Consensus Estimate for the company’s 2021 earnings has moved up 31.1% over the past 60 days. Further, the company’s long-term earnings growth rate of 6.8% and a VGM Score of A, reflect inherent potential.

Let’s Delve a Little Deeper

It is quite apparent that ODP Corporation’s low-cost model, multiple routes to market, expanded product portfolio, and flexible supply chain and distribution capabilities bode well. Markedly, the company’s Business Acceleration Program has helped it in attaining cost-effective structure and improving operational efficiencies. We also note that the company is in its early stage of “Maximize B2B” restructuring plan.

Management commenced multiyear restructuring plan “Maximize B2B” in May 2020 with the objective to realign the company’s operational focus to support its "business-to-business" solutions and IT services business units and improve costs. Through this initiative, the company intends to accelerate growth on its B2B platform, lower dependency on its retail consumer operations, and maximize cost savings. Management expects this restructuring plan to be completed by the end of 2023.



While challenges remain, the company remains encouraged by the pace of new business wins and renewals. Impressively, consolidated sales grew 18% on a sequential basis during third-quarter 2020 driven by strong e-commerce sales, and demand for work and learn-from-home products. Total omni-channel sales including buy-online, pick-up-in-store and same-day orders were up 32%. Notably, Business Solutions Division (BSD) and Retail Division registered sequential sales growth of 17% and 26%, respectively.

Undoubtedly, ODP Corporation’s value proposition and broad product assortment continue to resonate well with customers. This is quite evident from rise in demand in “work-from-anywhere” category. The company’s “Be Well At Work” categories, which include Cleaning & Breakroom, PPE and sanitation, have been registering sturdy demand. We note that adjacency categories — including cleaning and breakroom supplies, technology, furniture, and copy and print services — accounted for 47% of overall BSD sales in the third quarter. The company foresees promising opportunities in these categories.

Further, as far as CompuCom Division is concerned, the company remains optimistic about evolving trends in the "future of work" and cloud-based services. Also, annuity services revenues remained relatively stable.

Wrapping Up

ODP Corporation is trying all means to give itself a complete makeover. Management is making incremental investments to catapult the company into a product and services-driven enterprise. Moreover, the company has been focusing on enhancing e-commerce capabilities, and providing innovative products and services. Additionally, strong liquidity positions the company to invest in B2B platform and enhance shareholder returns.

3 More Stocks That Look Red Hot

Hibbett Sports HIBB has a long-term earnings growth rate of 17%. It currently flaunts a Zacks Rank #1.

DICK’S Sporting Goods DKS has a long-term earnings growth rate of 5.6%. It presently sports a Zacks Rank #1.

Target TGT has a trailing four-quarter earnings surprise of 52.4%, on average. The stock carries a Zacks Rank #2 (Buy).

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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