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Bear of the Day: American Woodmark (AMWD)

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Do not let a small rally distract you from long-term success. Over the long run, it’s companies with the strongest earnings that can stand the test of time. One way to find these companies is by leaning on the Zacks Rank. Stocks in the good graces of the Zacks Rank have the strongest earnings trends. Those with lower ranks have the opposite. Today’s Bear of the Day is a stock that has seen its earnings trend push to the downside. That could be the reason why the stock’s price has come under so much pressure.

Today’s Bear of the Day is Zacks Rank #5 (Strong Sell) American Woodmark (AMWD - Free Report) . American Woodmark manufactures and distributes kitchen, bath, and home organization products for the remodelling and new home construction markets in the United States. It offers made-to-order and cash and carry products. The company also provides turnkey installation services to its direct builder customers through a network of eight service centers. American Woodmark Corporation sells its products under the American Woodmark, Timberlake, Shenandoah Cabinetry, Waypoint Living Spaces, Estate by RSI, Continental Cabinets, VillaBath by RSI, Stor-It-All, and Professional Cabinet Solutions brands, as well as Hampton Bay, Glacier Bay, Style Selections, Allen + Roth, Home Decorators Collection, and Project Source. 

The earnings picture has continued to weaken for AMWD. Over the last week, analysts have come out and cut their estimates for the current year and next year. The negative revisions have cut our Zacks Consensus Estimates for the current year from $3.82 to $3.10 while next year’s number is off from $6.85 to $6.13. At first glance, the 97% EPS growth for next year looks amazing. When you zoom out another year, then you see the trouble. Current year EPS is forecast to contract 51% from the year before. Add up a 51% contraction, met with a big growth number and you are still behind where the earnings were before you started.

Revenue growth has been steady at 7% for the current year and next year. That is a big plus for the long-term investors who are toughing it out during this stretch.

The Furniture industry ranks in the Bottom 3% of our Zacks Industry Rank. Currently, there are no stocks in the good graces of the Zacks Rank in this entire industry. However, there are a few Zacks Rank #3 (Hold) stocks including Sleep Number (SNBR - Free Report) and Virco Manufacturing (VIRC - Free Report) .


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