Q4 Preview: Winter Weather Could Ice Staples (SPLS) Results

Staples, Inc. (Nasdaq: SPLS) is trading lower today ahead of the company's fourth quarter 2010 earnings report, expected out before the market opens tomorrow, March 2nd. The stock is down 1.4% on slightly heightened volume.

Staples is expected to report EPS of $0.40 on revs of $6.48 billion. Last quarter, the company reported EPS of $0.41 with revs of $6.5 billion, mixed to the consensus EPS of $0.40 and revs of $6.54 billion. Looking back at Q409, SPLS came up with EPS of $0.38, ex-items, on revs of $6.41 billion, mixed to the consensus.

Shares gained 10.8% through the quarter, to $22.31 at the end of January. The stock is down 5.1% since then, and finished up 2010 about 5.5% lower.

A simple valuation puts Staples with a forward P/E of 13.6x FY12 EPS estimates, compared to 22.3x for Office Depot (NYSE: ODP) and 11.6x for Office Max (NYSE: OMX).

Data from Bloomberg has 14 analysts with a Buy on SPLS, 6 with a hold, and one suggesting to Sell. The analyst price target average is $25.20, with a high of $30 and low of $17. Shares have traded in a range of $26.00 - $17.45 over the last 52-weeks.

Summary
With their third quarter report, Staples guided to Q410 EPS of $0.39 - $0.41, right in range of the consensus calling for $0.40 at the time.

• Goldman Sachs is expecting EPS of $0.40. They are looking for a 1% North American Retail same-store sales decline, noting tough weather conditions. North American Delivery sales should be modestly lower as well.
  
  They have a Neutral rating on the stock with a $25 price target.
  
  
• Deutsche Bank is looking for EPS of $0.40. They note that expectations for office products retailers are low heading into the quarter. Deutsche is modeling North American retail comps at 1%, with total sales up 0.9%. North American delivery should be up 3% and International down 6%.
  
  Deutsche has a $28 price target on the shares.
  
  
• KeyBanc is looking for EPS of $0.44. KeyBanc said that Staples will be able to expand their penetration into the governmental sector going forward. The firm alludes to Staples Analyst Day, when the company said that they had only 10% market share in five key categories (copy & print, technology, facilities & breakroom, promotional products, and furniture), and they are working to improve the presence in those areas. KeyBanc believes "Staples will be able to leverage its position as the industry leader in core office supplies to drive penetration in these adjacent categories to help drive top-line growth and protect margins in the face of increasing headwinds."
  
  KeyBanc also expects a dividend boost out of Staples in early March. The average increase has been 19%, potentially putting the dividend at $0.105 or $0.11 quarterly. They rate Staples at Hold.

Looking to Office Depot, we see that North American retail sales fell 2%, with comps down 1%. International sales fell 5%, and North American Business Solutions fell 3%.

Staples, Inc. is expected to release their Q410 earnings on Wednesday, March 2, 2011, at approximately 7:00am EST. Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release.

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