ODP Q3 Earnings Preview: NasdaqGS:ODP Down −12.5% This Week

in EARNINGS/INVESTING IDEAS by

The ODP Corporation (NasdaqGS:ODP) is scheduled to report Q3 earnings results before markets open for trading on November 5, 2020.

The company is expected to report earnings of $1.09/share on revenue of $2.512 billion. The consensus earnings per share (EPS) of $1.09/share is based on a poll of 4 analysts and represents a decline in eps of −27.5% over the same quarter last year, when the company reported earnings of $1.50/share.

The revenue forecast of $2.512 billion based on a poll of 3 analysts implies a year-over-year (YoY) decline in revenue of −9.7%. Last year the company reported $2.782 billion in revenue for the quarter.

Expected to report EPS contraction of −27.5% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $2,511.70 $2,782.00 −9.7%
EPS $1.09 $1.50 −27.5%

Earnings Call Trends

Historically, management has exceeded analyst expectations 7 out of the last 8 tracked quarters, and missed expectations 1 quarters.

What are your expectations from The ODP Corporation for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $0.08 -$0.08 −200.3% Missed
Q1, 2020 $0.67 $1.20 77.8% Beat
Q4, 2019 $0.86 $1.20 39.4% Beat
Q3, 2019 $1.33 $1.50 12.6% Beat
Q2, 2019 $0.46 $0.70 53.1% Beat
Q1, 2019 $0.60 $0.70 17.4% Beat
Q4, 2018 $0.75 $0.90 19.7% Beat
Q3, 2018 $1.21 $1.30 7.3% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 27, 2020, the stock price reacted by falling −10.6%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 5, 2020 $20.91 $18.70 −10.6% Decline
May 6, 2020 $18.50 $20.10 8.6% Increase
February 26, 2020 $23.70 $23 −3.0% Decline
November 6, 2019 $21.90 $25.40 16.0% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −3.30, the model suggests that the company is not likely to be an earnings manipulator. A value of −3.30 implies a 0.0% chance of earnings manipulation.

Fundamentals And Technical Analysis

The ODP Corporation is currently trading at $19.50/share, down −0.9% for the day. The company is trading at approximately 65.2% of its 52-week high of $29.90/share. The company’s stock price is up 4.3% since the last earnings report and down −12.5% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 37.14 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NasdaqGS:ODP Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of −3.68 and a forward P/E multiple of 6.17.

The ODP Corporation’s current share price also implies a price-to-book (P/B) multiple of 0.60. The following table summarizes some other key fundamental ratios:

Data as of November 1, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 27, 2020
Stock Price (Current) $19.50
P/E Ratio −3.7x
P/E Ratio (Fwd) 6.2x
PEG Ratio 0.0
Total Debt / Total Capital 63.1%
Levered Free Cash Flow $445 million
EV / EBITDA 4.3x

Finbox

The ODP Corporation is a small-cap stock with a market capitalization of $1.027 billion and a total enterprise value of $2.039 billion. The company operates in the Consumer Discretionary sector and the Specialty Retail industry.

The ODP Corporation provides business services and supplies, products, and technology solutions for small, medium, and enterprise businesses. The company operates in three divisions: Business Solutions, Retail, and CompuCom. The Business Solutions division offers office supply products and services, cleaning and breakroom supplies, technology services, copy and print services, and office furniture products and services through sales forces, catalogs, and telesales, as well as through Internet Websites in the United States, Puerto Rico, the U.S. Virgin Islands, and Canada. The Retail division operates a chain of retail stores, which offer office supplies; technology products and solutions; business machines and related supplies; print, cleaning, breakroom, and facilities products; and furniture, as well as printing, reproduction, mailing, and shipping services. As of March 28, 2020, this division operated 1,295 retail stores in the United States, Puerto Rico, and the U.S. Virgin Islands. The CompuCom division offers technology services supporting the distributed technology needs of enterprise organizations in the United States and Canada. It offers a range of solutions, including technology lifecycle management, end user computing and collaboration, service desk, remote technology monitoring and management, and IT workforce solutions. The company offers its products under various brands, including Office Depot, OfficeMax, CompuCom, and Grand&Toy, as well as others. The ODP Corporation was founded in 1986 and is based in Boca Raton, Florida.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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