For Immediate Release
Chicago, IL – October 26, 2010 – Zacks.com Analyst Blog features:Snap-On Inc. (SNA), LM Ericsson Telephone Company (ERIC), Office Depot Inc. (ODP), Staples Inc. (SPLS) and OfficeMax Inc. (OMX).
Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513
Here are highlights from Monday’s Analyst Blog:
Snap-On Inc. Beats Estimates
Snap-On Inc. (SNA) reported earnings from continuing operations of 80 cents per share for the third quarter of 2010, exceeding the Zacks Consensus Estimate of 65 cents.
Revenues of $653.1 million increased by $71.3 million, or 12.3%, from the corresponding prior-year period.
Outlook
Snap-On presently expects that full-year 2010 restructuring costs will approximate $15 million. The company currently expects full-year 2010 capital expenditures to be around $45 million.
Over the past few years, management has focused on delivering a more predictable and consistent financial performance. To this end, management implemented the ‘Driven to Deliver’ strategy in 2001, which resulted in an increased focus on customer relationships and business processes. In addition, the company has invested in new products and increased brand awareness.
In early 2005, management introduced the Rapid Continuous Improvement process, which is designed to improve organizational effectiveness and lower costs, including working capital requirements. As a result, asset utilization has improved by rationalizing production through plant closures, and working capital has been used more effectively.
Headquartered in Kenosha, Wisconsin, Snap-on is a global provider of professional tools, equipment, and related solutions for technicians, vehicle service centers, original equipment manufacturers and other industrial users.
We currently have a Neutral recommendation on Snap-On Inc.
Ericsson Matches Estimates
LM Ericsson Telephone Company (ERIC) reported earnings of 16 cents per share from continuing operations for the third quarter of 2010, matching the Zacks Consensus Estimate.
Revenues in the quarter were up 2% on a year-over-year basis to SEK 47.5 billion ($6.5 billion) but were down 1% sequentially. Comparable sales after adjusting for currency effects decreased 5% compared to the prior-year quarter. Component shortages and supply chain bottlenecks made it difficult to fully meet the demand for mobile broadband. The modernization of existing 2G/3G stations has started to take off and is expected to be accretive to earnings in 2011.
During the quarter, mobile broadband expanded, especially in the U.S. and Japan. In China, demand for 2G capacity expansions was favorable and in India, vendor selection for 3G services is almost over. Ericsson is supplying 3G equipment to Vodafone Essar, Bharti Airtel and Idea Cellular in India. Western Europe is slower as far as modernization contracts are concerned. Worldwide operator focus is on reducing expenses and outsourcing of operations.
Earnings Preview: Office Depot
Office Depot Inc. (ODP), one of the leading suppliers of office products and services, is scheduled to report its third-quarter 2010 financial results before the bell on Wednesday, October 27, 2010. The current Zacks Consensus Estimate for the quarter is a loss of 2 cents a share. For the quarter under review, revenues are $2,962 million, according to the Zacks Consensus Estimate.
Third-Quarter 2010 Zacks Consensus
Analysts under the Zacks consideration expect Office Depot to post a loss of 2 cents a share for the third-quarter of 2010. The current Zacks Consensus Estimate reflects an improvement over a loss of 8 cents posted in the prior-year quarter. The current Zacks Consensus Estimates for the quarter range from a low of negative 5 cents to a high of positive 5 cents.
Zacks Agreement & Magnitude
The current Zacks Consensus Estimate has remained stagnant over the last 30 days, with none of the 17 analysts covering the stock having revised their estimates. In the last 7 days too, no analysts have revisited their estimates keeping the consensus unchanged.
Mixed Earnings Surprise History
With respect to earnings surprises, Office Depot has met as well as topped the Zacks Consensus Estimate over the last four quarters in the range of 0.0% to 71.4%. The average remained at 45.7%. This suggests that Office Depot has outperformed the Zacks Consensus Estimate by an average of 45.7% in the last four quarters.
Office Depot in Neutral Lane
Office Depot is repositioning itself to keep afloat in a difficult consumer environment. The company is containing costs, closing underperforming stores, reducing exposure to higher dollar-value inventory items, shuttering non-critical distribution facilities and focusing on providing innovative products and services, which should all contribute to margin improvement.
Furthermore, the company has always been looking for accretive opportunities to enhance its global footprint. Office Depot is reviewing capital-efficient opportunities to expand its reach in Eastern Europe, Asia and South America. The company believes that India and China will provide significant growth opportunities.
The company has been also actively managing its cash flows, and expects to generate free cash flows between $50 million and $70 million in fiscal 2010. In addition, the company’s strong liquidity, driven by solid cash balance, positions it to drive future growth.
However, the company’s decision of not participating in the bid to renew the Los Angeles County office supplies contract, which is set to expire on January 1, 2011, may hamper its financial condition and keep the stock under pressure.
Moreover, we remain cautious about the macroeconomic environment and sluggish job market. The recovery in the economy still lacks luster. As a result, consumers and small businesses still remain watchful about their spending on big-ticket items such as business machines and other durable products. We observe that the demand for office products is closely tied to the health of the economy.
Given the pros and cons, we remain Neutral on Office Depot, the operator of office supply stores under brand names such as Office Depot, Foray, Ativa, Break Escapes and Worklife with a target price of $4.25. Office Depot, which competes with Staples Inc. (SPLS) and OfficeMax Inc. (OMX)), holds a Zacks #4 Rank, which translates into a short-term ‘Sell’ recommendation.
Want more from Zacks Equity Research? Subscribe to the free Profit from the Pros newsletter: http://at.zacks.com/?id=5515.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Zacks “Profit from the Pros” e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5517.
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it’s your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.
Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Follow us on Twitter: http://twitter.com/zacksresearch
Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts.
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
Contact:
Mark Vickery
Web Content Editor
312-265-9380
Visit: www.zacks.com
ERICSSON LM ADR (ERIC): Free Stock Analysis Report
OFFICE DEPOT (ODP): Free Stock Analysis Report
OFFICEMAX INC (OMX): Free Stock Analysis Report
SNAP-ON INC (SNA): Free Stock Analysis Report
STAPLES INC (SPLS): Free Stock Analysis Report
Zacks Investment Research

