Bull of the Day: American Woodmark (AMWD) - Bull of the Day
October 04 2013 - 4:37AM
Zacks
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
finishes.
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
trend.
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
improvement.
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.
Estimates Revisions
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 year.
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 four
quarters.
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
forward.
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
medium- term.
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