Office Depot, Inc. Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next
Office Depot, Inc. (NASDAQ:ODP) shares fell 9.8% to US$2.30 in the week since its latest annual results. It looks like a credible result overall - although revenues of US$11b were in line with what analysts predicted, Office Depot surprised by delivering a statutory profit of US$0.18 per share, a notable 10% above expectations. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see analysts' latest (statutory) post-earnings forecasts for next year.
See our latest analysis for Office Depot
Following last week's earnings report, Office Depot's four analysts are forecasting 2020 revenues to be US$10.4b, approximately in line with the last 12 months. Statutory earnings per share are expected to bounce 103% to US$0.36. Before this earnings report, analysts had been forecasting revenues of US$10.5b and earnings per share (EPS) of US$0.37 in 2020. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
There were no changes to revenue or earnings estimates or the price target of US$2.13, suggesting that the company has met expectations in its recent result. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Office Depot analyst has a price target of US$3.00 per share, while the most pessimistic values it at US$1.60. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. Over the past five years, revenues have declined around 5.0% annually. On the bright side, analysts expect the decline to level off somewhat, with the forecast for a 1.9% decline in revenue next year. Compare this against analyst estimates for companies in the wider market, which suggest that revenues (in aggregate) are expected to decline 5.7% next year. So it's pretty clear that, while it does have declining revenues, at least analysts expect Office Depot to suffer less severely than the wider market.
The Bottom Line
The most obvious conclusion from these results is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. The consensus price target held steady at US$2.13, with the latest estimates not enough to have an impact on analysts' estimated valuations.
Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Office Depot going out to 2022, and you can see them free on our platform here..
It might also be worth considering whether Office Depot's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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