Why ODP Corp. (ODP) Might be Well Poised for a Surge

ODP Corp. (ODP) could be a solid addition to your portfolio given a notable revision in the company's earnings estimates. While the stock has been gaining lately, the trend might continue since its earnings outlook is still improving.

Analysts' growing optimism on the earnings prospects of this office supply retailer is driving estimates higher, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- has this insight at its core.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

For ODP Corp. Strong agreement among the covering analysts in revising earnings estimates upward has resulted in meaningful improvement in consensus estimates for the next quarter and full year.

The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 Month EPS

Current-Quarter Estimate Revisions

The company is expected to earn $0.33 per share for the current quarter, which represents a year-over-year change of -41.07%.

The Zacks Consensus Estimate for ODP Corp. has increased 25% over the last 30 days, as one estimate has gone higher compared to no negative revisions.

Current-Year Estimate Revisions

For the full year, the company is expected to earn $2.79 per share, representing a year-over-year change of -15.45%.

There has been an encouraging trend in estimate revisions for the current year as well. Over the past month, one estimate has moved up for ODP Corp. versus no negative revisions. This has pushed the consensus estimate 9% higher.

Favorable Zacks Rank

The promising estimate revisions have helped ODP Corp. earn a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

ODP Corp. shares have added 27.9% over the past four weeks, suggesting that investors are betting on its impressive estimate revisions. So, you may consider adding it to your portfolio right away to benefit from its earnings growth prospects.

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This article originally published on Zacks Investment Research (zacks.com).

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