American Woodmark: Zacks’ Bull of the Day Play

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 500 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.

Excellent Quarterly Results

On August 20, the company reported results for its first fiscal quarter ended July 31, 2015. Net sales for the quarter increased 9% year-over-year to $231.2 million with growth in both the dealer and new construction channels. New construction based revenue surged over 18% for the quarter.

Net income came in at $15.2 million or $0.92 per share, up from $9.2 million or $0.59 per share for the same quarter a year ago. The results were significantly ahead of the Zacks Consensus Estimate. In fact, the company has beaten the Zacks Consensus Estimates in all of the last four quarters with an average quarterly surprise of 21.7%

Gross profit was 21.7% of net sales compared with 17.5% in the same quarter last fiscal year, driven by higher sales volume and improved operating efficiency. Net cash from operating activities was $15.0 million, up from $9.3 million, thanks mainly to higher operating profitability.

Rising Estimates

As a result of strong quarterly report, analysts have raised their estimates for the company. Zacks Consensus Estimates for the current and the next fiscal year now stand at $2.78 per share and $3.22 per share, up from $2.43 per share and $2.90 per share, 30 days ago.

Rising estimates sent AMWD back to a Zacks Rank#1 (Strong Buy).

The Bottom Line

The housing market continues on its growth trajectory. New construction activity remains strong and the management reported incoming orders outpacing shipments for the reported quarter, resulting in a healthy backlog for the current quarter. With improving labor market, homeowners are also willing to spend more on upgrades and remodeling. These trends bode well for the company. Further, being a domestically focused company, it is immune to global growth concerns.

In addition the top Zacks Rank, the stock also has the Style Score of “A” for Growth as well as for Momentum and an excellent industry rank of 9 out of 265 (top 3%).  With top stock rank, industry rank and style scores, the stock looks poised for outperformance in the short- to medium- term. The stock was earlier featured as the “Bull of the Day” on March 13 this year; it is up almost 33% since then.

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