What to Look for in Staples Earnings

Staples Inc. (NASDAQ: SPLS) is set to report its fiscal fourth-quarter financial results before the markets open on Friday. The consensus estimates from Thomson Reuters call for $0.28 in earnings per share (EPS) on $5.41 billion in revenue. In the same period of last year, the specialty retailer posted EPS of $0.31 and revenue of $5.66 billion.

This $6 billion company by market cap is trying to win approval for the acquisition of Office Depot Inc. (NASDAQ: ODP). U.S. regulators are currently against this merger, and the value of Office Depot, even after its acquisition of OfficeMax, is just $2.9 billion. European regulators have granted what appears to be approval, but Staples has agreed to sell off certain operations. Staples also has offered concessions here in the United States. This deal remains under legal challenge by the U.S. regulators.

Earlier in the fourth quarter, the company announced a few leadership changes in an effort to streamline its organization and build a more simple structure going forward. The goal of these changes was to speed up decision making and drive profitable growth, either as a standalone company or in combination with Office Depot.

Also recently, Staples made an unexpected partnership with Party City to expand its e-commerce sales in February. Essentially, Staples will list Party City’s products on websites that it operates.
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A few analysts weighed in on Staples during its fourth quarter:

• Citigroup reiterated a Hold rating with a $10 price target.
• Merrill Lynch downgraded it to Underperform from Buy and lowered the price target to $9 from $21.
• Deutsche Bank reiterated a Hold rating and lowered its price target to $11 from $12.
• Teslsey Advisory Group downgraded it to Market Perform from Outperform and lowered its price target to $12 from $23.

So far in 2016, Staples has performed more or less in line with the broad markets, with the stock up about 2% year to date. However, over the past 52 weeks the stock is down 40%.

Shares of Staples were trading up 1.2% at $9.82 on Thursday, with a consensus analyst price target of $13.33 and a 52-week trading range of $8.04 to $17.04.