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Will Office Depot's Earnings Beat?

Zacks Equity Research

Office Depot, Inc. (ODP) is slated to report its first-quarter 2013 results on Apr 30, 2013. In the last quarter, it posted a negative surprise of 66.7%. Let’s see how things are shaping up for this announcement.

Growth Factors this Past Quarter

Office Depot’s disappointing bottom-line performance was due to lower revenues that muted the company’s cost containment efforts. After declining 5% in the third quarter, Office Depot’s total revenue fell 11.7% in the fourth quarter. Business budget remains tight, consumers remain more cautious than ever before and companies are trying hard to navigate through the challenging environment. Consumers and small businesses remain frugal about big-ticket spending on items such as business machines and other durable products.  

Earnings Whispers?

Our proven model does not conclusively show that Office Depot is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method) 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: ESP for Office Depot is -60.00%. This is because the Most Accurate Estimate stands at 2 cents, while the Zacks Consensus Estimate is pegged at 5 cents.

Zacks Rank #5 (Strong Sell): Office Depot’s Zacks Rank #5 (Strong Sell) lowers the predictive power of ESP because the Zacks Rank #5 when combined with a negative ESP makes surprise prediction difficult. We caution against stocks with Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks that Warrant a Look

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Hertz Global Holdings, Inc. (HTZ), Earnings ESP of +5.56% and a Zacks Rank #1 (Strong Buy)

J&J Snack Foods Corp. (JJSF), Earnings ESP of +9.84% and a Zacks Rank #2 (Buy)

Amazon.com Inc. (AMZN), Earnings ESP of +14.29% and a Zacks Rank #3 (Hold).

Read the Full Research Report on ODP

Read the Full Research Report on AMZN

Read the Full Research Report on HTZ

Read the Full Research Report on JJSF

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