NEW YORK (TheStreet) -- Shares of Office Depot (ODP) - Get Report are down by 2.72% to $7.15 at the start of trading on Friday morning, as EU antitrust regulators begin their investigation into the company's proposed merger with Staples (SPLS).
The $6.3 billion merger, which has already received regulatory approval in China, Australia and New Zealand, would combine the two largest office supplier's in the U.S.
Preliminary comments from the EU suggests that regulators are concerned about the implications a tie-up between the two companies would have on consumers.
"The transaction could eliminate an important competitor and reduce the choice of suitable suppliers in already concentrated markets, which could lead to price increases," the EU commission said in a statement today.
A decision from European regulators on whether the deal can go forward is scheduled for February 10.
Separately, 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 compelling growth in net income, solid stock price performance and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow 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 69.6% when compared to the same quarter one year prior, rising from -$191.00 million to -$58.00 million.
- Powered by its strong earnings growth of 69.44% and other important driving factors, this stock has surged by 30.03% 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 ($0.46 versus -$0.67).
- The gross profit margin for OFFICE DEPOT INC is currently lower than what is desirable, coming in at 25.87%. 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, ODP's net profit margin of -1.68% significantly underperformed when compared to the industry average.
- Net operating cash flow has declined marginally to -$89.00 million or 1.13% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, OFFICE DEPOT INC has marginally lower results.
- You can view the full analysis from the report here: ODP