FBR Capital Office Supply Update: Sector Trends Tough...Selective Here
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Price: $52.71 -1.55%
Rating Summary:
3 Buy, 15 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 17 | Down: 15 | New: 11
Rating Summary:
3 Buy, 15 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 17 | Down: 15 | New: 11
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FBR Capital Office Supply Update: Sector Trends Tough...Selective Here
FBR analyst says, "We adjust our estimates on the heels of a webcast presentation on Friday by Staples (Nasdaq: SPLS)(Underperform), an 8-K released after the close by Office Depot (NYSE: ODP)(Outperform), and the
downward preannouncement of sales trends by supplier Newell Rubbermaid (NYSE: NWL)(Not Rated). Trends for the sector are difficult. As for the stocks, United Stationers (Nasdaq: USTR)(Outperform) remains the best positioned, as a diversified office supply wholesaler with company-specific sales catalysts. We rate ODP Outperform, with high risk yet high reward. We, alternatively, maintain Underperform ratings on Staples (SPLS) and Genuine Parts Company (NYSE: GPC). In the case of GPC, that stock looks particularly overvalued, in our view. We rate Office Max (NYSE: OMX) Market Perform, with that stock trading hands at 0.08x EV/sales."
"Growth in some of these categories, though, is more complex (people-heavy,
for example) or, in some cases, carries lower-than-house gross margins (such as technology hardware). SPLS's recent comments about growth in certain such adjacent areas, namely, copy & print and, to a larger extent, Easy Tech services, indicated deceleration, versus its comments in the past, in our view. (We outline the latest comments herein.) All in, we expect that the EBIT margin outlook for SPLS will contract—not expand—and this keeps us avoiding the stock, at 0.50x EV/sales."
FBR analyst says, "We adjust our estimates on the heels of a webcast presentation on Friday by Staples (Nasdaq: SPLS)(Underperform), an 8-K released after the close by Office Depot (NYSE: ODP)(Outperform), and the
downward preannouncement of sales trends by supplier Newell Rubbermaid (NYSE: NWL)(Not Rated). Trends for the sector are difficult. As for the stocks, United Stationers (Nasdaq: USTR)(Outperform) remains the best positioned, as a diversified office supply wholesaler with company-specific sales catalysts. We rate ODP Outperform, with high risk yet high reward. We, alternatively, maintain Underperform ratings on Staples (SPLS) and Genuine Parts Company (NYSE: GPC). In the case of GPC, that stock looks particularly overvalued, in our view. We rate Office Max (NYSE: OMX) Market Perform, with that stock trading hands at 0.08x EV/sales."
"Growth in some of these categories, though, is more complex (people-heavy,
for example) or, in some cases, carries lower-than-house gross margins (such as technology hardware). SPLS's recent comments about growth in certain such adjacent areas, namely, copy & print and, to a larger extent, Easy Tech services, indicated deceleration, versus its comments in the past, in our view. (We outline the latest comments herein.) All in, we expect that the EBIT margin outlook for SPLS will contract—not expand—and this keeps us avoiding the stock, at 0.50x EV/sales."
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