Here's Why Office Depot (ODP) Stock Appears Promising Now

Shares of Office Depot, Inc. (NASDAQ:ODP) have surged 62.6% in the past three months, easily outperforming the industry’s growth of 8.3%. The stock has been benefitting from an impressive earnings surprise record, which was maintained in third-quarter 2019. This marked the company’s sixth straight quarter of positive earnings surprise. Also, the bottom line improved from the year-ago period.

Lower interest expenses coupled with impressive margins in all divisions, owing to gains from the Business Acceleration Program (BAP), contributed to quarterly results. Speaking of BAP, the plan focuses on reducing costs, improving operational efficiencies, enhancing service delivery by using technology and automation efficiently, and identifying investment opportunities. Management anticipates cost savings of at least $40 million for 2019 and run-rate savings of more than $100 million afterwards

Moreover, the company has been closing underperforming stores, shutting non-critical distribution facilities, reducing exposure to higher dollar-value inventory items, and focusing more on e-commerce platforms and product innovation. Its buy online and pick up in store initiative is also gaining traction.

Additionally, management is making efforts to transform Office Depot into a product and service-based company in the wake of declining demand for office products. In this regard, it signed a channel partner agreement with MicroCorp and Telos Identity Management Solutions. The deal is anticipated to drive store traffic in the near term. Keeping in these lines, it also incorporated Tech-Zone services desk across its stores and launched a subscription-based business services platform, BizBox, to assist start-ups and small businesses.

Further, Office Depot is on track to revive its sluggish CompuCom segment, which was touted to help the company to acclimatize to the fast-changing retail landscape along with providing enterprise-level tech services and products to customers. In doing so, the company undertook strategies — including streamlining operational structure, exploring options to speed up cross-selling opportunities and restructuring customer-facing organization.

All said, we hope that this Zacks Rank #2 (Buy) company’s well chalked out endeavors will help it keep the momentum going in the near future.

3 More Stocks to Watch

Hibbett Sports (NASDAQ:HIBB) has a long-term earnings growth rate of 12.2%. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

DICK’S Sporting Goods (NYSE:DKS) has a long-term earnings growth rate of 6.5%. It presently sports a Zacks Rank #1.

Bed Bath & Beyond (NASDAQ:BBBY) has a long-term earnings growth rate of 6.4% and a Zacks Rank #2.

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