NEW YORK (TheStreet) -- Office Depot (ODP) - Get Report shares are down 2.41% to $8.89 in trading on Wednesday as investors reacted negatively to a federal judge blocking two different companies from merging.

On Tuesday a federal judge blocked food distributor Sysco Corp's (SYY) - Get Report $3.5 billion acquisition of US Foods on grounds that the merger would reduce competition and in turn raise prices.

Office Depot shareholders recently approved a $6 billion merger with Staples (SPLS) but the deal is still subject to regulatory approval.

Office Depot and Staples are the country's two largest office supply retailers and regulators previously blocked the companies from merging in 1997.

If the merger is approved, Office Depot shareholders will get $7.25 per share in cash and 0.288 of a share in Staples stock for each share they own.

TheStreet Ratings team rates OFFICE DEPOT INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate OFFICE DEPOT INC (ODP) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Specialty Retail industry. The net income increased by 141.3% when compared to the same quarter one year prior, rising from -$109.00 million to $45.00 million.
  • Powered by its strong earnings growth of 138.09% and other important driving factors, this stock has surged by 57.65% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • OFFICE DEPOT INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, OFFICE DEPOT INC reported poor results of -$0.67 versus -$0.22 in the prior year. This year, the market expects an improvement in earnings ($0.47 versus -$0.67).
  • The gross profit margin for OFFICE DEPOT INC is currently lower than what is desirable, coming in at 26.08%. Regardless of ODP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.16% trails the industry average.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Specialty Retail industry and the overall market, OFFICE DEPOT INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: ODP Ratings Report