Impressive second quarter 2012 results that included a 71.4%
earnings surprise coupled with positive earnings surprises in the
last four trailing quarters with an average beat of 31.4% helped
) achieve a Zacks #1 Rank (Strong Buy) on October 2.
Since its second quarter report, shares of this office product
supplier have been touching new highs and surged about 67.6% to hit
their 52-week high of $8.33 on September 17. Moreover, with a solid
year-to-date return of 56.9%, reinstatement of quarterly dividend
and a history of beating quarterly earnings estimates, this stock
offers an attractive investment opportunity.
The Rank Driver
Better-than-expected second quarter earnings, innovative
products and services and effective cost management- are the
primary rank drivers for this stock.
OfficeMax, which competes with
Office Depot Inc
), declared second-quarter results on August 2 wherein earnings of
12 cents per share surpassed the Zacks Consensus Estimate by more
than 71% and increased substantially from 7 cents in the prior-year
quarter. The quarter's earnings were aided by effective cost
The quarter's downside was the total sales, which dropped 2.7%
from the year-ago period to $1,602.4 million, and also fell short
of the Zacks Consensus Estimate of $1,638 million. However,
operating income was strong and surged 29.1% to $23.1 million, and
operating margin expanded 30 basis points to 1.4%.
OfficeMax is curtailing costs, closing underperforming stores
and focusing on providing innovative products and services, which
should all contribute to margin improvements. The company should
gain from recent growth initiatives, which include the ImPress copy
and print and Ctrlcenter PC services, janitorial and sanitation
supply, category management, and managed print businesses. The
company's digital as well as technology and document solutions are
also gaining traction.
OfficeMax's store-in-a-store initiative known as New Channels is
gaining momentum. The company manages the office supply departments
of other retailers (including supermarkets, convenience stores and
drug stores), and provides category management services. Such
initiatives provide avenues outside its stores, and would help in
augmenting its profit margins and returns on investment.
Earnings Estimate Revisions
The Zacks Consensus Estimate for 2012 increased 1.4% to 74 cents
per share in the last 60 days. The current estimate implies a
year-over-year growth of 21.5%. Moreover, for 2013, Zacks Consensus
Estimate increased 1.3% to 80 cents a share, reflecting an
estimated year-over-year growth of about 8%.
OfficeMax currently trades at a forward P/E of 10.31x, a 38.85%
discount to the peer group average of 16.86x. Also, on a
price-to-book basis, the shares are trading at 1.17x, a 51.85%
discount to the peer group average of 2.43x. Based on the company's
fundamentals and a projected long-term earnings growth of 10.4%, we
expect the company's discount to narrow in the coming quarters.
About the Company
Founded in 1913 and headquartered in Naperville, Illinois,
OfficeMax Incorporated (formerly known as Boise Cascade
Corporation) and its subsidiaries distribute office supplies and
paper, print and document services, technology products and
solutions, and office furniture to business enterprises, government
offices and consumers.
The company, through approximately 29,000 associates, serves its
customers via direct sales, catalogs, Internet and retail stores
located in the United States, Canada, Australia, New Zealand,
Mexico, the U.S. Virgin Islands and Puerto Rico. The company has a
market cap of $661.8 million.
OFFICE DEPOT (ODP): Free Stock Analysis Report
OFFICEMAX INC (OMX): Free Stock Analysis Report
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