Why Office Depot Earnings Are On Point

[cnxvideo id=”655384″ placement=”ros”]Office Depot Inc. (NASDAQ: ODP) reported its first-quarter financial results before the markets opened on Tuesday. The company said that it had $0.16 in earnings per share (EPS) and $2.68 billion in revenue, versus consensus estimates that called for $0.12 in EPS and revenue of $2.71 billion. In the same period of last year, the specialty retailer posted EPS of $0.10 and $3.54 billion in revenue.

As recently announced, Office Depot reached an agreement to sell its business in Australia and New Zealand, which is expected to close within the next few months, upon conclusion of the regulatory review. Office Depot also announced in late April the completed sale of its business in South Korea. The company’s international business located in mainland China continues to be actively marketed for sale.

The company’s sourcing and trading operations in Asia, which management plans to retain, contributed $3 million in sales and an operating loss of $1 million in the first quarter of 2017.

In terms of the outlook, the company continues to expect total sales in 2017 to be lower than 2016, primarily due to the impact of planned store closures, prior-year contract customer losses and continued challenging market conditions.

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Specifically, Office Depot continues to expect adjusted operating income of approximately $500 million in fiscal 2017, including funding a number of strategic initiatives to grow the business throughout the year. The 2017 target is a comparable year-over-year increase of about 10%.

The consensus estimates for the 2017 full year call for $0.48 in EPS and $10.36 billion in revenue.

On the books, Office Depot’s cash and cash equivalents totaled $744 million at the end of the quarter, compared with $763 million at the end of December 2016.

Gerry Smith, CEO of Office Depot, commented:

I am very pleased that we continued our positive momentum into the new year and delivered a strong earnings performance in the first quarter. The company completed its sale of South Korea in late April and also entered into a favorable agreement to sell the operations located in Australia and New Zealand. Going forward, our focus is on executing against our strategic initiatives to grow the North American business.

Shares of Office Depot closed Monday up 0.6% at $5.11, with a consensus analyst price target of $4.79 and a 52-week trading range of $3.01 to $6.35. Following the release of the report, the stock was up 13.5% at $5.80 in early trading indications Tuesday.

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