American Woodmark reported excellent quarterly results buoyed by
strong growth in new construction as well as remodeling sales
channels. As a result, earnings estimates have surged, sending this
cabinet maker to Zacks rank #1 (Strong Buy).
About the Company
American Woodmark Corporation (AMWD) is a leading manufacturer and
distributor of kitchen and bath cabinets for remodeling and new
home construction markets.
The company manufactures cabinets under four major
brands: American Woodmark, Timberlake Cabinetry,
Shenandoah Cabinetry and Waypoint Living Spaces and sells more than
435 cabinet lines in a wide variety of design materials and
Its products are sold through a network of independent dealers and
distributors, and directly to major builders and Lowe's and The
Home Depot. The company operates 11 manufacturing facilities and 9
builder service centers across the country.
Remodeling Activity Continues to Surge
While housing markets appeared to be taking a breather of late due
to increase in mortgage rates, still tight credit availability and
rise in home prices, remodeling activity continued its uptrend.
Further, interest rates have come down after the 'no-taper'
announcement. Per Freddie Mac, fixed mortgage rates are now at
their lowest levels in three months. As a result, housing markets
may pick up again.
Home Improvement/Furniture Industry Keeps Shining
The Furniture Industry is currently #12 (out of 265) on the Zacks
Industry Rank list, as a result of positive earnings revisions
Further, as the economy picks up momentum and the job market heals
further, discretionary spending on home improvement products will
continue to rise.
Excellent Quarterly Results
The company reported its first fiscal quarter results on August 20,
2013. Net sales rose by 20% compared with the same quarter of prior
fiscal year to $178.1 million. Net income came in at $6.7
million, or $0.43 per share, compared with income of $1.0
million or $0.04 per share for the prior-year quarter.
The Company experienced strong gains in both of its sales channels
during the quarter, led by new construction sales growth of more
than 40%. Remodeling market also recorded a decent mid-single-digit
The company's gross profit margin for quarter was 18.9% of net
sales, up from 14.9% in the first quarter of the prior year.
As a result of strong quarterly report, analysts have raised
their estimates for AMWD. Zacks consensus estimate for the current
quarter now stands at $0.39 per share up from $0.35 per share, 60
days ago. The consensus estimate for the current year is also up to
$1.65 per share from $1.38 per share earlier. Current estimates
translate into triple digit earnings growth for the current quarter
as well as the fiscal year and double digit growth for next
Rising estimates sent AMWD back to a Zacks Rank#1 (Strong Buy)
on August 23, 2013. AMWD has a solid track of earnings
surprises-with an average positive surprise of 142.2% for the last
AMER WOODMARK (AMWD): Free Stock Analysis
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The Bottom Line
The housing market continues on its growth trajectory. Inventories
of new and existing homes remain at low levels and while mortgage
rates have risen from their recent record lows, they are still
quite low from historical perspective. Further, with improving job
market the demand from remodeling market will also rise going
AMWD is a Zacks Rank#1 (Strong Buy) stock. It also has a Zacks
recommendation of "Outperform" and looks poised to deliver
excellent returns. Further the industry rank of 12 out of 265
indicated a strong likelihood of outperformance in the short- to
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