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Why Office Depot Inc. Stock Popped Tuesday

By Daniel Sparks - Aug 7, 2018 at 12:07PM

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A solid quarter has encouraged Office Depot management.

What happened

Shares of office supplies retailer Office Depot (ODP -0.64%) jumped as much as 15.1% on Tuesday, following the company's second-quarter earnings release. Shares are up 12.7% as of 11:37 a.m. EDT.

The company's better-than-expected second-quarter results were likely the primary reason for the stock's surge on Tuesday. Both sales and earnings per share came in above consensus analyst estimates for the period.

A chart showing a stock price rising

Image source: Getty Images.

So what

Office Depot reported second-quarter sales of $2.63 billion, up 11% from $2.36 billion in the year-ago quarter. On average, analysts expected revenue of $2.58 billion, or 9% sales growth. 

Non-GAAP earnings per share for the period came in at $0.05, down from $0.06 in the year-ago quarter. On average, analysts expected non-GAAP EPS of $0.04.

Office Depot CEO Gerry Smith said he was "extremely pleased" with the company's quarterly performance, pointing to Office Depot's improving sales trends across each of its operating divisions.

Highlighting management's confidence, the company reinitiated its share-repurchase program and bought back $8 million worth of shares during the quarter.

Now what

Importantly, Smith believes the company's execution on its strategy positions it to grow over the long haul. "I am encouraged by the momentum we are seeing across all of our businesses and the success we are realizing in generating working capital improvements," Smith said.

With a strong quarter behind it, management maintained its outlook for full-year sales of $10.8 billion, which would mark 5% growth over 2017 sales. In addition, Office Depot expects full-year adjusted operating income of $360 million and free cash flow of $350 million.

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