Nomura Securities on Office Product Super Stores: Underperforming Employment-Driven Companies
SPLS Hot Sheet
Rating Summary:5 Buy, 6 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 20 | Down: 11 | New: 38
Nomura Securities on Office Product Super Stores: Underperforming Employment-Driven Companies
Analyst, Aram Rubinson, said, "ince initiating coverage of the Office sector, we have argued that the challenges facing Staples (Nasdaq: SPLS), Office Depot (NYSE: ODP) and OfficeMax (NYSE: OMX) are secular, not just cyclical. We compare revenue trends at SPLS/ODP/OMX to a basket of ten other companies whose prospects depend on the employment cycle. The two groups appear correlated, as they turn negative and then positive in the same periods, but the relationship is not as strong as the market may think. Since turning positive, revenue growth for the OP basket has been down -0.1% on average and has seen only two positive quarters in the past seven. The employment-related basket has averaged gains of +14.2% over the same period with strong gains in each of the last seven quarters. Our conclusion is that the OP basket has behaved quite differently from other employment-related companies. While we believe that SPLS will eventually find its way, we remain very cautious on the channel. We rate SPLS, ODP and OMX Neutral, with target prices of $13, $3.30 and $6, respectively."
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Analyst, Aram Rubinson, said, "ince initiating coverage of the Office sector, we have argued that the challenges facing Staples (Nasdaq: SPLS), Office Depot (NYSE: ODP) and OfficeMax (NYSE: OMX) are secular, not just cyclical. We compare revenue trends at SPLS/ODP/OMX to a basket of ten other companies whose prospects depend on the employment cycle. The two groups appear correlated, as they turn negative and then positive in the same periods, but the relationship is not as strong as the market may think. Since turning positive, revenue growth for the OP basket has been down -0.1% on average and has seen only two positive quarters in the past seven. The employment-related basket has averaged gains of +14.2% over the same period with strong gains in each of the last seven quarters. Our conclusion is that the OP basket has behaved quite differently from other employment-related companies. While we believe that SPLS will eventually find its way, we remain very cautious on the channel. We rate SPLS, ODP and OMX Neutral, with target prices of $13, $3.30 and $6, respectively."
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