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American Woodmark Q1 Preview: Housing Market Woes Proceed (NASDAQ:AMWD)

ByEditorialTeam

Aug 29, 2022

Tony Anderson/DigitalVision through Getty Pictures

The Constructing Merchandise trade within the Industrials sector just isn’t for the faint of coronary heart. The high-beta area of interest is uncovered to the rapidly shifting actual property and residential enchancment markets. With dire housing market indicators currently and a weakening client scenario, many of those shares have seen sharp losses in 2022.

Constructing Merchandise Down Sharply This 12 months

Building Products Down Sharply This Year

Constancy Investments

Housing Knowledge Continues To Confirm Poorly vs Expectations

Housing Data Continues To Verify Poorly vs Expectations

Goldman Sachs Funding Analysis

In response to Financial institution of America International Analysis, American Woodmark Corp. (NASDAQ:AMWD) engages within the manufacture and distribution of kitchen cupboards and vanities for the transforming and new dwelling building markets. The corporate affords made-to-order and cash-and-carry merchandise. It additionally gives turnkey set up companies to its direct builder prospects by way of a community of eight service facilities.

The Virginia-based $794 million market cap Constructing Merchandise trade agency within the Industrials sector has unfavorable earnings over the previous 12 months and doesn’t pay a dividend, based on The Wall Road Journal.

Again on Aug. 18, Deutsche Financial institution initiated protection on American Woodmark with a promote ranking and a worth goal of $45, based on MT Newswires. Extra broadly, AMWD has a mean funding ranking of maintain and worth targets starting from $45 to $75, based on Capital IQ.

On valuation, unfavorable EPS leads me to check with the corporate’s price-to-sales ratio historical past. Knowledge from YCharts present that American Woodmark trades at simply 0.43 instances income, a traditionally low cost worth over the past twenty years. Weak point in the actual property market and tightening client monetary situations little doubt stress the inventory’s valuation, however historical past suggests the inventory is usually a purchase at these ranges.

AMWD: Value-to-Gross sales Ratio Historical past Suggests Worth

AMWD: Price-to-Sales Ratio History Suggests Value

YCharts

Wanting forward, Wall Road Horizon’s company occasion knowledge present a Q1 2023 earnings date of Tuesday BMO with an earnings name to comply with. You possibly can hear stay right here. After that, the corporations’ Q2 reporting date is projected to happen on Tuesday, Nov. 22 BMO. The corporate only in the near past held a shareholder assembly and took part at a micro-cap convention – that’s about when the inventory peaked this month.

Company Occasion Calendar: Earnings On Faucet

Corporate Event Calendar: Earnings On Tap

Wall Road Horizon

Digging into expectations round earnings, the choices market has priced in a 7.6% earnings-related inventory worth swing utilizing the nearest-expiring at-the-money straddle. Analysts anticipate $1.27 of EPS, based on Choices Analysis & Expertise Providers (ORATS). On the bullish aspect of the ledger, there was a pair of analyst upgrades for the reason that final reporting date, based on ORATS. The inventory beat EPS estimates final quarter however missed within the prior six.

Choices Angle: AMWD Shares Seen Shifting Extra Than 7% Put up-Earnings

Options Angle: AMWD Shares Seen Moving More Than 7% Post-Earnings

ORATS

The Technical Take

So, with a considerably favorable valuation scenario, however a poor earnings beat price historical past, what do the charts say?

The inventory notched a June low close to $41 however was rejected on the key $55 mark earlier this month. There’s a broader downtrend off the early 2021 excessive that seems agency regardless of a current peek above the resistance line. Discover, although, that there’s important quantity within the mid-upper $30s from a few years in the past. Charts bear in mind this exercise. To wit, AMWD bottomed in March 2020 at simply above $35. I see assist on the June low and close to $35. Given the downtrend and momentum, I believe shares may retest the primary or each of these ranges.

A breakout above $55 will surely assist affirm that $40 was a longer-term backside.

AMWD: Probing Resistance, However Rejected On The First Try

AMWD: Probing Resistance, But Rejected On The First Attempt

StockCharts

The Backside Line

With earnings on faucet and unfavorable inventory worth momentum, I see shares buying and selling decrease post-earnings. $40.70 is first assist, however a transfer above $56 would sign a bullish turnaround. With choices merchants seeing a greater than 7% transfer Tuesday, you may need to be affected person to both purchase the dip towards $41 or await a longer-term breakout.

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