Joe Hendrickson Introduction American Woodmark (NASDAQ:AMWD) has seen their share price decline ~16% on a year-to-date basis and nearly 25% since the high reached in March, prompting me to swing around. Simply put, this is a business that should grow over time, being levered toward residential (and some commercial) construction. However, a number of questionable moves by management over the past few years - and respective underperformance - in addition to potential pricing pressure from capacity growth ...

American Woodmark (AMWD) is a Zacks Rank #5 (Strong Sell) as earnings estimates have tracked lower after a recent earnings miss.  The company is the third largest manufacture of kitchen and bath cabinets. This article will look at why this stock is a Zacks Rank #5 (Strong Sell) as it is the Bear of the Day.DescriptionAmerican Woodmark Corp. engages in the manufacture and distribution of kitchen cabinets and vanities for the remodeling and new home construction markets. The company was founded by William F. ...

Sales and Market Share - For the fiscal year ended April 30, 2024, Home Depot and Lowe's combined accounted for approximately 41.6% of net sales[14] - Approximately 41.6% of total net sales during fiscal year 2024 came from Home Depot and Lowe's, indicating a significant reliance on these two customers[38] - Builders represented approximately 42.4% of net sales during fiscal 2024, highlighting the importance of this channel[15] - Independent dealers and distributors accounted for approximately 16.0% of net sales in fiscal 2024, indicating a strong growth opportunity[16] - The company holds an estimated 10% market share in the U.S. cabinet market, ranking as the second or third largest player[31] Manufacturing and Operations - The company operates 18 manufacturing facilities across the U.S. and Mexico, enhancing production capacity and efficiency[17] - A new manufacturing facility in Monterrey, Mexico, began operations in the third quarter of fiscal 2024, expanding production capabilities[17] - The company operates 18 manufacturing facilities in the U.S. and Mexico, enhancing productivity and efficiency through vertical integration and automation[34] - The company has made significant investments in automation to improve productivity and reduce manufacturing costs[17] - Manufacturing expansions and realignments may lead to short-term earnings decreases until capacity and cost savings are realized[52] Financial Performance and Risks - Fluctuating raw material and energy costs could materially impact manufacturing costs and overall financial performance[41] - Economic downturns could lead to longer periods of recession in the cabinetry industry, adversely affecting sales and earnings[44] - The company's consolidated indebtedness could increase vulnerability to economic conditions and reduce liquidity, impacting operations and capital expenditures[61] - Future acquisitions may result in dilution to existing shareholders and could adversely affect financial condition if integration is unsuccessful[74] - Environmental compliance costs and liabilities could materially impact the company's financial condition and operations[69] Customer Relationships and Market Dynamics - The company has an average relationship length of over 20 years with its top 10 customers, indicating strong customer loyalty[33] - Increased buying power of large customers due to consolidation may limit the company's ability to maintain or raise prices, adversely affecting sales and financial position[60] - The company faces competition from both domestic and international manufacturers, which may affect market share and pricing strategies[45] Operational Challenges - The company is exposed to risks associated with global operations, including political, economic, and regulatory changes in the markets where it operates[53] - The company faces risks related to the timely procurement of raw materials, which could adversely affect manufacturing and marketing capabilities[57] - The company does not enter into long-term contracts with suppliers, relying instead on purchase orders, which may lead to sourcing interruptions and inefficiencies[59] - The company is implementing an Enterprise Resource Planning (ERP) system, which may disrupt operations and incur significant costs[67] - The company relies on information technology systems, which are vulnerable to cybersecurity threats that could disrupt operations and harm reputation[68] - The company may face challenges in attracting and retaining qualified personnel, which could impair growth potential and increase costs[75] - Natural disasters or terrorist acts could disrupt manufacturing and distribution, adversely affecting business operations and financial results[78] Strategic Initiatives - The company’s GDP strategy focuses on Growth, Digital Transformation, and Platform Design to drive long-term profitability[10] - The company has established a commitment to operational excellence to manage cost inflation and enhance quality[18] - The company has implemented Right Environment Councils to promote diversity and inclusion across all locations[29] - The OSHA recordable rate was 1.42 during fiscal 2024, which is 57% better than the industry average of 3.3[27]

Investors in American Woodmark Corporation (AMWD) need to pay close attention to the stock based on moves in the options market lately. That is because the Jul 19, 2024 $40 Call had some of the highest implied volatility of all equity options today.What is Implied Volatility?Implied volatility shows how much movement the market is expecting in the future. Options with high levels of implied volatility suggest that investors in the underlying stocks are expecting a big move in one direction or the other. It ...

American Woodmark Corporation (NASDAQ:AMWD) Q4 2024 Results Conference Call May 23, 2024 4:30 PM ET Company Participants Paul Joachimczyk - Senior Vice President and Chief Financial Officer Scott Culbreth - President and Chief Executive Officer Conference Call Participants Brian Biros - Thompson Research Group Zack Pacheco - Loop Capital Collin Verron - Jefferies Tim Wojs - Baird Operator Good day, and welcome to the American Woodmark Corporation Fourth Fiscal Quarter 2024 Conference Call. Today's call is b ...

American Woodmark (AMWD) came out with quarterly earnings of $1.70 per share, missing the Zacks Consensus Estimate of $1.75 per share. This compares to earnings of $2.21 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -2.86%. A quarter ago, it was expected that this cabinet maker would post earnings of $1.13 per share when it actually produced earnings of $1.66, delivering a surprise of 46.90%.Over the last four quarters, the ...

[Executive Summary & Financial Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Financial%20Highlights) [Fiscal Fourth Quarter 2024 Highlights](index=1&type=section&id=Fiscal%20Fourth%20Quarter%202024%20Highlights) American Woodmark reported a decrease in net sales and net income for Q4 FY2024 compared to the prior year, with Adjusted EBITDA also declining, while generating positive cash flow from operations and free cash flow, and repurchasing shares Q4 FY2024 Financial Highlights | Metric | Q4 FY2024 | YoY Change (%) | | :-------------------------------- | :---------- | :--------- | | Net sales | $453.3 million | -5.8% | | Net income | $26.8 million | -11.1% | | GAAP EPS | $1.69 | | | Adjusted EPS | $1.70 | | | Adjusted EBITDA | $54.7 million | -16.2% | | Cash provided by operating activities | $43.3 million | | | Free cash flow | $6.8 million | | | Repurchased shares | 170,571 shares | | | Value of shares repurchased | $15.9 million | | [Fiscal Year 2024 Highlights](index=1&type=section&id=Fiscal%20Year%202024%20Highlights) For the full fiscal year 2024, American Woodmark experienced a decrease in net sales but achieved a significant increase in net income and Adjusted EBITDA, generating strong cash flow and executing substantial share repurchases FY2024 Financial Highlights | Metric | FY2024 | YoY Change (%) | | :-------------------------------- | :----------- | :--------- | | Net sales | $1,847.5 million | -10.6% | | Net income | $116.2 million | +24.0% | | GAAP EPS | $7.15 | | | Adjusted EPS | $8.53 | | | Adjusted EBITDA | $252.8 million | +5.2% | | Cash provided by operating activities | $230.8 million | | | Free cash flow | $138.5 million | | | Repurchased shares | 1,108,715 shares | | | Value of shares repurchased | $87.7 million | | [Management Commentary & FY2025 Outlook](index=1&type=section&id=Management%20Commentary%20%26%20FY2025%20Outlook) CEO Scott Culbreth highlighted strong Q4 performance, exceeding expectations for net sales and Adjusted EBITDA due to an improving demand environment and strategic focus on operational excellence, while projecting low single-digit net sales growth for FY2025 - CEO Scott Culbreth noted strong Q4 performance, exceeding expectations for **net sales** and **Adjusted EBITDA**, attributing it to an improving demand environment and strategic focus on automation and operational excellence[3](index=3&type=chunk) - Despite a **10.6%** reduction in **net sales** for the full fiscal year, **Adjusted EBITDA** grew to **$252.8 million**, and **Adjusted EBITDA margin** improved by over **200 basis points**[3](index=3&type=chunk) - The company plans to continue investing in automation, capacity, and digital transformation to achieve long-term targets[3](index=3&type=chunk) - For fiscal year **2025**, the **net sales** outlook is for **low single-digit growth** across all channels[3](index=3&type=chunk) [Detailed Financial Results](index=1&type=section&id=Detailed%20Financial%20Results) [Fourth Quarter Operating Results](index=1&type=section&id=Fourth%20Quarter%20Operating%20Results) Net sales for Q4 FY2024 decreased by 5.8% year-over-year to $453.3 million, with net income declining by $3.3 million primarily due to lower net sales and one-time startup costs for new locations, and Adjusted EPS also decreased Q4 FY2024 Operating Results | Metric | Q4 FY2024 (USD Million) | Q4 FY2023 (USD Million) | Change (USD Million) | % Change (%) | | :-------------------- | :---------- | :---------- | :------- | :------- | | Net sales | $453.278 | $481.095 | -$27.817 | -5.8% | | Net income | $26.798 | $30.141 | -$3.343 | -11.1% | | GAAP EPS (diluted) | $1.69 | $1.80 | | | | Adjusted EPS (diluted) | $1.70 | $2.21 | | | | Adjusted EBITDA | $54.678 | $65.274 | -$10.596 | -16.2% | | Adjusted EBITDA margin | 12.1% | 13.6% | | | - The decrease in **net income** was primarily due to a decrease in **net sales** and one-time startup costs for new locations in Hamlet, North Carolina, and Monterrey, Mexico[4](index=4&type=chunk) [Fiscal Year Operating Results](index=1&type=section&id=Fiscal%20Year%20Operating%20Results) For FY2024, net sales decreased by 10.6% to $1,847.5 million, yet net income increased significantly to $116.2 million, driven by improved pricing and operational efficiencies, with Adjusted EBITDA also rising and its margin notably improving FY2024 Operating Results | Metric | FY2024 (USD Million) | FY2023 (USD Million) | Change (USD Million) | % Change (%) | | :-------------------- | :----------- | :----------- | :-------- | :-------- | | Net sales | $1,847.502 | $2,066.200 | -$218.698 | -10.6% | | Net income | $116.216 | $93.723 | +$22.493 | +24.0% | | GAAP EPS (diluted) | $7.15 | $5.62 | | | | Adjusted EPS (diluted) | $8.53 | $7.62 | | | | Adjusted EBITDA | $252.773 | $240.379 | +$12.394 | +5.2% | | Adjusted EBITDA margin | 13.7% | 11.6% | | | - The increase in **net income** for fiscal **2024** was primarily due to pricing better matching inflationary pressures and overall increased efficiencies across existing operating locations[5](index=5&type=chunk) - These benefits were partially offset by one-time startup costs and inefficiencies from new locations in Hamlet, North Carolina, and Monterrey, Mexico, which are expected to ramp up production throughout the calendar year[5](index=5&type=chunk) [Balance Sheet & Cash Flow](index=3&type=section&id=Balance%20Sheet%20%26%20Cash%20Flow) As of April 30, 2024, the company maintained a healthy cash position and significant revolving credit facility availability, generating strong cash from operating activities and free cash flow for the fiscal year, and continuing its share repurchase program Balance Sheet & Cash Flow Highlights (as of April 30, 2024) | Metric | Amount | | :------------------------------------ | :----------- | | Cash & cash equivalents | $87.4 million | | Revolving credit facility availability | $322.9 million | | Term loan debt | $206.3 million | | Revolving credit facility drawn | $163.8 million | | Cash provided by operating activities (FY2024) | $230.8 million | | Free cash flow (FY2024) | $138.5 million | | Shares repurchased (Q4 FY2024) | 170,571 shares | | Value of shares repurchased (Q4 FY2024) | $15.9 million | | Shares repurchased (FY2024) | 1,108,715 shares | | Value of shares repurchased (FY2024) | $87.7 million | | Remaining share repurchase authorization | $89.5 million | [Fiscal 2025 Financial Outlook](index=3&type=section&id=Fiscal%202025%20Financial%20Outlook) [Fiscal 2025 Financial Outlook Details](index=3&type=section&id=Fiscal%202025%20Financial%20Outlook%20Details) For fiscal year 2025, American Woodmark anticipates low single-digit net sales growth and projects Adjusted EBITDA between $235 million and $255 million, excluding certain non-operating income and expense items for which a GAAP reconciliation is not provided due to estimation difficulties FY2025 Financial Outlook | Metric | Outlook | | :---------------- | :-------------------------------- | | Net sales | Low single digit increase year-over-year | | Adjusted EBITDA | $235 million to $255 million | - The **Adjusted EBITDA** outlook excludes certain income and expense items (e.g., restructuring costs, interest expense, stock-based compensation, tax items) that management believes are not part of underlying operations, and a reconciliation to GAAP net income is not provided due to the difficulty in estimating these highly variable items[9](index=9&type=chunk) [Company Overview](index=3&type=section&id=Company%20Overview) [About American Woodmark](index=3&type=section&id=About%20American%20Woodmark) American Woodmark Corporation is one of the nation's largest cabinet manufacturers, employing over 8,800 individuals across more than a dozen brands, partnering with major home centers, builders, and independent dealers to provide cabinet solutions while upholding core values of customer satisfaction, integrity, teamwork, and excellence - American Woodmark is one of the nation's largest cabinet manufacturers, with over **8,800 employees** and more than a **dozen brands**[10](index=10&type=chunk) - The company partners with major home centers, builders, and independent dealers and distributors to help customers find their unique style and transform their homes[10](index=10&type=chunk) - Core values across all operations (service, distribution, corporate, manufacturing) include commitment to customer satisfaction, integrity, teamwork, and excellence[10](index=10&type=chunk) [Non-GAAP Financial Measures](index=6&type=section&id=Non-GAAP%20Financial%20Measures) [Use and Definitions of Non-GAAP Measures](index=6&type=section&id=Use%20and%20Definitions%20of%20Non-GAAP%20Measures) American Woodmark presents non-GAAP financial measures like EBITDA, Adjusted EBITDA, Adjusted EPS, Free Cash Flow, and Net Leverage, which management uses for performance analysis and strategy identification, emphasizing they are supplementary to, not substitutes for, GAAP results - Non-GAAP financial measures are used by management to evaluate business performance, prepare annual operating budgets, view operating trends, perform analytical comparisons, and identify strategies for improvement[17](index=17&type=chunk)[18](index=18&type=chunk)[21](index=21&type=chunk) - These non-GAAP measures are intended to provide additional means of analyzing results and should be viewed in addition to, not as a substitute for, GAAP results[17](index=17&type=chunk) - **Adjusted EBITDA** is defined as net income adjusted for income tax, interest, depreciation & amortization, amortization of customer relationship intangibles, acquisition/restructuring expenses, non-recurring restructuring charges, stock-based compensation, asset disposals, foreign exchange changes, debt modification, and pension settlement charges[19](index=19&type=chunk) - **Adjusted EPS per diluted share** excludes the per share impact of acquisition/restructuring expenses, non-recurring restructuring charges, amortization of customer relationship intangibles, debt modification, pension settlement charges, and the tax benefit of these add-backs[21](index=21&type=chunk) - **Free cash flow** is defined as cash from continuing operations minus capital expenditures (cash payments for property, plant & equipment, and investments in displays)[22](index=22&type=chunk) - **Net leverage** is defined as net debt (**total debt** less **cash and cash equivalents**) divided by the trailing **12 months Adjusted EBITDA**[23](index=23&type=chunk)[24](index=24&type=chunk) [Reconciliation of EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin](index=7&type=section&id=Reconciliation%20of%20EBITDA%2C%20Adjusted%20EBITDA%2C%20and%20Adjusted%20EBITDA%20Margin) This section provides a detailed reconciliation of net income (GAAP) to EBITDA and Adjusted EBITDA for the three and twelve months ended April 30, 2024, and 2023, including corresponding net income and Adjusted EBITDA margins Reconciliation of EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin (USD Thousands) | Metric | Three Months Ended April 30, 2024 | Three Months Ended April 30, 2023 | Twelve Months Ended April 30, 2024 | Twelve Months Ended April 30, 2023 | | :----------------------------------------------------- | :-------------------------------- | :-------------------------------- | :--------------------------------- | :--------------------------------- | | Net income (GAAP) | $26,798 | $30,141 | $116,216 | $93,723 | | Add back: | | | | | | Income tax expense | 7,799 | 7,688 | 35,752 | 28,963 | | Interest expense, net | 1,885 | 3,216 | 8,207 | 15,994 | | Depreciation and amortization expense | 12,596 | 11,499 | 48,337 | 48,077 | | Amortization of customer relationship intangibles and trademarks | — | 11,417 | 30,444 | 45,667 | | **EBITDA (Non-GAAP)** | **$49,078** | **$63,961** | **$238,956** | **$232,424** | | Add back: | | | | | | Acquisition and restructuring related expenses | — | 20 | 47 | 80 | | Non-recurring restructuring charges, net | — | 215 | (198) | 1,525 | | Pension settlement, net | — | (55) | — | (7) | | Net gain on debt modification | — | (2,089) | — | (2,089) | | Change in fair value of foreign exchange forward contracts | 1,785 | 904 | 1,544 | — | | Stock-based compensation expense | 3,496 | 2,147 | 10,682 | 7,396 | | Loss on asset disposal | 319 | 171 | 1,742 | 1,050 | | **Adjusted EBITDA (Non-GAAP)** | **$54,678** | **$65,274** | **$252,773** | **$240,379** | | Net Sales | $453,278 | $481,095 | $1,847,502 | $2,066,200 | | Net income margin (GAAP) | 5.9 % | 6.3 % | 6.3 % | 4.5 % | | Adjusted EBITDA margin (Non-GAAP) | 12.1 % | 13.6 % | 13.7 % | 11.6 % | [Reconciliation of Adjusted EPS per Diluted Share](index=8&type=section&id=Reconciliation%20of%20Adjusted%20EPS%20per%20Diluted%20Share) This section provides a reconciliation of net income (GAAP) to Adjusted net income and GAAP EPS per diluted share to Adjusted EPS per diluted share for the three and twelve months ended April 30, 2024, and 2023 Reconciliation of Adjusted EPS per Diluted Share (USD Thousands, except share data) | Metric | Three Months Ended April 30, 2024 | Three Months Ended April 30, 2023 | Twelve Months Ended April 30, 2024 | Twelve Months Ended April 30, 2023 | | :----------------------------------------------------- | :-------------------------------- | :-------------------------------- | :--------------------------------- | :--------------------------------- | | Net income (GAAP) | $26,798 | $30,141 | $116,216 | $93,723 | | Add back: | | | | | | Acquisition and restructuring related expenses | — | 20 | 47 | 80 | | Non-recurring restructuring charges, net | — | 215 | (198) | 1,525 | | Pension settlement, net | — | (55) | — | (7) | | Amortization of customer relationship intangibles and trademarks | — | 11,417 | 30,444 | 45,667 | | Net gain on debt modification | — | (2,089) | — | (2,089) | | Tax benefit of add backs | 121 | (2,589) | (7,785) | (11,791) | | **Adjusted net income (Non-GAAP)** | **$26,919** | **$37,060** | **$138,724** | **$127,108** | | Weighted average diluted shares (GAAP) | 15,881,015 | 16,735,892 | 16,260,222 | 16,685,359 | | **EPS per diluted share (GAAP)** | **$1.69** | **$1.80** | **$7.15** | **$5.62** | | **Adjusted EPS per diluted share (Non-GAAP)** | **$1.70** | **$2.21** | **$8.53** | **$7.62** | [Reconciliation of Free Cash Flow](index=8&type=section&id=Reconciliation%20of%20Free%20Cash%20Flow) This section reconciles cash provided by operating activities to free cash flow for the twelve months ended April 30, 2024, and 2023 Reconciliation of Free Cash Flow (USD Thousands) | Metric | Twelve Months Ended April 30, 2024 | Twelve Months Ended April 30, 2023 | | :------------------------------------ | :--------------------------------- | :--------------------------------- | | Cash provided by operating activities | $230,750 | $198,837 | | Less: Capital expenditures | 92,241 | 45,380 | | **Free cash flow** | **$138,509** | **$153,457** | [Net Leverage Calculation](index=9&type=section&id=Net%20Leverage%20Calculation) This section details the calculation of net debt and the net leverage ratio as of April 30, 2024, which is 1.14 Net Leverage Calculation (as of April 30, 2024) (USD Thousands) | Metric | Amount | | :------------------------------------ | :-------------------- | | Current maturities of long-term debt | $2,722 | | Long-term debt, less current maturities | 371,761 | | **Total debt** | **$374,483** | | Less: cash and cash equivalents | (87,398) | | **Net debt** | **$287,085** | | Adjusted EBITDA (trailing 12 months) | $252,773 | | **Net leverage** | **1.14** |

American Woodmark Corporation (AMWD) is slated to release fourth-quarter fiscal 2024 results on May 23, after market close.In the last reported quarter, the company’s earnings per share (EPS) and net sales surpassed the Zacks Consensus Estimate by 46.9% and 15.1%, respectively. On a year-over-year basis, revenues decreased 12.2%, but adjusted EPS increased 13.7%.American Woodmark’s bottom line topped the consensus mark in the trailing four quarters, an average surprise being 41.3%.Trend in Estimate Revision ...

Company Overview - American Woodmark (AMWD) is currently rated as a 1 (Strong Buy) by Zacks, with an A grade for Value [2] - The stock has a Forward P/E ratio of 9.83, significantly lower than the industry average of 13.66 [2] - Over the past 52 weeks, AMWD's Forward P/E has fluctuated between a high of 11.88 and a low of 7.28, with a median of 10.66 [2] Valuation Metrics - AMWD has a Price-to-Book (P/B) ratio of 1.60, which is attractive compared to the industry's average P/B of 3.45 [2] - The P/B ratio for AMWD has ranged from a high of 1.81 to a low of 0.93 over the past year, with a median of 1.42 [2] - The Price-to-Cash Flow (P/CF) ratio for AMWD stands at 6.95, compared to the industry's average P/CF of 12.14 [3] - AMWD's P/CF has varied between a high of 7.87 and a low of 4.36 over the past year, with a median of 6.36 [3] Investment Outlook - The combination of AMWD's strong valuation metrics suggests that the stock is likely undervalued at present [3] - Considering the strength of its earnings outlook, AMWD is positioned as an impressive value stock currently [3]

Core Viewpoint - American Woodmark Corporation is positioned for potential upside despite recent revenue declines, supported by strong profitability metrics and a favorable market outlook [2][15]. Financial Performance - For the first nine months of the 2024 fiscal year, American Woodmark generated $1.39 billion in sales, a 12% decrease from $1.59 billion in the previous year [3]. - Remodeling sales dropped 13.8% year over year, with independent dealer and distributor channel sales down 10.3% and home center channel sales down 15.1% [3][4]. - Net income increased from $63.6 million to $89.4 million, driven by a rise in gross profit margin from 16.45% to 21.07% [4]. - Operating cash flow rose from $110.8 million to $187.4 million, while EBITDA grew from $175.1 million to $198.1 million [4][5]. Market Outlook - Management forecasts a low double-digit revenue decline for the 2024 fiscal year but expects EBITDA to be between $247 million and $253 million [6]. - The company aims to achieve over $350 million in EBITDA by 2028, capitalizing on a fragmented market and potential for acquisitions [11][15]. - The U.S. housing market is expected to recover, driven by years of underbuilding and increased repair and remodeling activities [4][6]. Competitive Positioning - American Woodmark has a market share of 15% in the new construction market, 24% in the home center market, and only 2% in the dealer market [13]. - The company is expanding its facilities to enhance production capacity and market reach, including recent expansions in North Carolina and Mexico [11][15]. - On a price to operating cash flow basis, American Woodmark is competitively priced compared to similar firms, with a valuation of 7.5 [7].