The Zacks Analyst Blog Highlights: Office Depot, Brightpoint, MetroPCS
Communications, Research In Motion and Nokia
CHICAGO, June 7, 2012
CHICAGO, June 7, 2012 /PRNewswire/ --Zacks.com announces the list of stocks
featured in the Analyst Blog. Every day the Zacks Equity Research analysts
discuss the latest news and events impacting stocks and the financial markets.
Stocks recently featured in the blog include Office Depot Inc. (NYSE:ODP),
Brightpoint Inc. (Nasdaq:CELL), MetroPCS Communications, Inc. (NYSE:PCS),
Research In Motion Ltd. (Nasdaq:RIMM) and Nokia Corp. (NYSE:NOK)
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from the Pros newsletter: http://at.zacks.com/?id=5513
Here are highlights from Wednesday's Analyst Blog:
Office Depot Downgraded to Underperform
Following a dismal first-quarter 2012 top-line performance, we recently
downgraded our long-term recommendation on Office Depot Inc. (NYSE:ODP) to
Underperform with a price target of $2.00. Earlier, Office Depot had been
enjoying a Neutral rating.
Office Depot's total revenue of $2,872.8 million fell short of the Zacks
Consensus Estimate of $2,884 million, and decreased approximately 3% on a
year-over-year basis. Management had earlier predicted sales to decline
between 3% and 4%. However, the quarterly earnings came in at 5 cents a share,
in line with the Zacks Consensus Estimate, and marked a sharp increase from a
break even in the year-ago quarter.
We believe that the change in the demand for office supplies products and
services remains one of the indicators that describe the health of the
economy. The economy is still not out of the woods, and amidst such a scenario
Office Depot has to walk the tight rope to juggle with unprecedented situation
that may hurt its growth prospects.
The underperformance can be traced back to North American Retail and
International divisions, where sales were down 8% and 2%, respectively.
However, North American Business Solutions division acted as a savior to some
extent, with sales rising 3%.
We remain cautious about the macroeconomic environment and sluggish job
market. The recovery in the economy is murky. As a result, consumers and small
businesses still remain watchful about their spending for 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.
Management now expects total sales for the second quarter of 2012 to decline
3% from the year-ago quarter, and further hinted that adjusted operating
income is expected to decline $20 million to $30 million. Further, Office
Depot forecasted that North American Retail division's comparable-store sales
would decline in the second quarter, and hinted that International division's
sales would fall 4% to 5% in constant currency.
Moreover, due to high exposure to international markets, Office Depot remains
prone to currency fluctuations. The weakening of foreign currencies against
the U.S. dollar may require the company to either raise prices or contract
profit margins in locations outside the U.S. An increase in price may have an
adverse impact on the demand for the products.
Brightpoint Renews MetroPCS Deal
Brightpoint North America L.P, an operating arm of a leading distributor of
wireless devices, Brightpoint Inc. (Nasdaq:CELL), recently announced the
renewal of its contract with MetroPCS Communications, Inc. (NYSE:PCS) owned
MetroPCS Wireless, Inc.
As per the deal, Brightpoint will provide logistic assistance to
MetroPCS-owned store, agents and its retail partners all across the U.S.
Brightpoint is expected to provide services like receiving of orders from
customers and proper delivery of the ordered goods. Additionally, the company
will also offer storage as well as customer credit facilities to MetroPCS
Brightpoint already has a solid supply-chain agreement with large mobile
handset developers such as Research In Motion Ltd. (Nasdaq:RIMM), Nokia Corp.
(NYSE:NOK), and HTC Corp., Such relationships will further strengthen its
network and deliver improved services to its clients.
Recently, Brightpoint is witnessing various challenges as the company reduced
its financial forecast for fiscal 2012. This is the second time that the
company has lowered its 2012 financial guidance, which was provided at the end
of 2011. We believe that loss of a major client in the company's high-margin
Logistics segment in the U.S is one of the prime reasons for such defensive
guidance. Moreover,global economic volatility and weaker margins on product
sales coupled with the recent trend of consolidation among telecom carriers
may act as negative catalysts for the company in the long term. We, thus,
maintain our long-term Underperform recommendation on Brightpoint Inc.
Currently, Brightpoint Inc. has a Zacks #5 Rank, implying a short-term Strong
Sell rating on the stock.
Brightpoint Inc. is a leader in global distribution of wireless devices and
the provision of customized logistic services to wireless equipment
manufacturers and carriers.
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