Why Office Depot (ODP) Stock Is Down Today

NEW YORK (TheStreet) -- Office Depot (ODP) was falling -4.9% to $5.04 Tuesday following Staples' (SPLS) poor first quarter earnings.

For the first quarter Staples reported earnings of 18 cents a share, falling short of analysts' expectations of 21 cents a share. The retailer reported revenue of $5.65 billion for the quarter, while analysts surveyed by Thomson Reuters expected revenue of $5.62 billion. Staples said that same-store sales fell 4% in the quarter.

As a competitor to Staples, Office Depot's stock sank following the poor results.

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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 robust revenue growth, solid stock price performance and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and poor profit margins."

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

  • ODP's very impressive revenue growth greatly exceeded the industry average of 4.6%. Since the same quarter one year prior, revenues leaped by 60.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, ODP's share price has jumped by 30.26%, exceeding the performance of the broader market during that same time frame. 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 has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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 continued to lose money by earning -$0.22 versus -$0.40 in the prior year. This year, the market expects an improvement in earnings ($0.15 versus -$0.22).
  • The gross profit margin for OFFICE DEPOT INC is currently lower than what is desirable, coming in at 25.08%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -2.50% trails that of the industry average.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Specialty Retail industry. The net income has significantly decreased by 1537.9% when compared to the same quarter one year ago, falling from -$6.66 million to -$109.00 million.
  • You can view the full analysis from the report here: ODP Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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