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American Woodmark stock target cut, maintains hold on Q1 earnings beat

EditorNatashya Angelica
Published 05/24/2024, 12:00 PM
© Reuters.

On Friday, Loop Capital adjusted its stock price target for American Woodmark (NASDAQ:AMWD) Corporation (NASDAQ:AMWD), a leading manufacturer and distributor of kitchen cabinets and vanities for the remodeling and new home construction markets. The firm reduced the price target to $100 from the previous $112 while maintaining a Hold rating on the stock.

American Woodmark reported fourth-quarter earnings that surpassed expectations, primarily driven by stronger-than-anticipated sales. The company's performance was notably supported by its increased involvement in the new residential construction sector, which experienced a rise in demand for single-family housing starts. Investments in new capacity and digital growth have, however, led to an increase in fixed costs. These growth-related expenses are anticipated to persist throughout the fiscal year 2025.

Despite these higher costs, Loop Capital acknowledges the potential for American Woodmark's growth investments to enhance margins over the coming years. Nonetheless, fiscal year 2025 is viewed as a transitional period for the company, with EBITDA guidance falling below market consensus.

The current market demand remains uncertain, and the stock price is expected to stay within a certain range until either interest rates decrease and the repair and remodel (R&R) and new housing sectors rebound, or the company moves past the phase of elevated investment costs.

The revised price target of $100 reflects a $12 decrease from the previous target and is based on a 7x multiple of the company's estimated EBITDA for fiscal year 2026.

InvestingPro Insights

As American Woodmark Corporation navigates through its transitional fiscal year 2025, investors are keeping a close eye on key financial metrics and market movements. According to real-time data from InvestingPro, American Woodmark has a market capitalization of $1.47 billion, with a P/E ratio of 12.56, reflecting a valuation that is modest relative to near-term earnings growth. The company's PEG ratio, which stands at 0.23, suggests that the stock may be undervalued when factoring in its earnings growth potential.

On the operational front, American Woodmark's gross profit margin for the last twelve months as of Q3 2024 was 20.82%, with a robust return on assets of 7.62%. This financial health is further underlined by the company's significant price appreciation over the last year, boasting a one-year price total return of 71.62%. However, with revenue declining by 10.13% over the same period, it's clear that the company faces challenges ahead.

InvestingPro Tips indicate that management's aggressive share buyback strategy and the company's liquidity, with liquid assets exceeding short-term obligations, could signal confidence in American Woodmark's financial strategy. Moreover, despite analysts anticipating a sales decline in the current year, the company is expected to remain profitable, which may offer some reassurance to investors.

For those seeking comprehensive analysis, there are over 10 additional InvestingPro Tips available, which could provide deeper insights into American Woodmark's financial outlook. To explore these further, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro, tailored to the company's specific financials.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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