OfficeMax, Inc.

OfficeMax, Inc.( OMX ) continues to trade near its multi-year high after reporting better than expected Q1 results in late April that included a 95% earnings surprise. The solid surprise sent estimates higher, with the next-year estimate now projecting 48% earnings growth.

Company Description

OfficeMax, Inc., together with its subsidiaries, specializes in selling office products worldwide. The company was founded in 1913 and has a market cap of $1.45 billion.

OfficeMax's earnings and share price took a hit in the volatile market of 2008 and 2009 as its big, corporate customers scaled back on spending. But now with sales showing signs of stability and the company focusing on more effectively managing its cost structure, it has returned to profitability and pushed its share price back to a multi-year high. We saw that strong upward momentum on April 29 with OfficeMax's Q1 results that included a massive 95% earnings surprise.

First-Quarter Results

Revenue for the period was mostly even with last year at $1.92 billion. But earnings came in much better than expected at 39 cents, 95% ahead of the Zacks Consensus Estimate. In spite of one miss two quarters ago, the company still has an average earnings surprise of 35% over the last four quarters.

OfficeMax's quarter was driven by cost and expense management, with operating income jumping to $49.4 million from $27.5 million last year as its operating margin expanded to 3.3% from 2% last year.

Growing Cash Position

The company also emerged from the quarter with a stronger balance sheet, with its cash position increasing $391 million to $564 million against a debt-load of about $296 million when excluding $1.47 billion in non-recourse debt.

Estimates

The analysts were encouraged by the solid Q1 performance, sending estimates significantly higher. The current year is up 33 cents in the last month to 78 cents, while the next-year estimate has added 26 cents to $1.16, a bullish 48% growth projection.

Valuation

With some big gains over the last 12 months, OMX's forward P/E multiple of 21X is a premium to its peers 18X. Its P/B multiple of 2.77X is exactly in line with its peers.

The Chart

OMX recently hit a new multi-year after posting some big gains over the last year on a rebounding economy and operational gains. In spite of the short-term pullback, the long-term trend should provide support on any more weakness. Take a look below.