American Woodmark (AMWD), which makes kitchen cabinets and bathroom vanities for the remodeling and new home construction markets, is trading roughly flat to slightly up this morning after reporting its Q4 (Apr) results.
Adjusted EPS rose 14% yr/yr to $1.87, which was slightly below market expectations. Revenue was basically flat yr/yr, up just 0.4% to $407.4 mln, which also was below market expectations. As is typical for the company, it did not provide guidance. Adjusted EBITDA margin dipped to 15.7% from 16.1% in the prior year period.
Breaking down AMWD's results by sales channel helpfully provides a fuller picture of how the quarter went. AMWD sells to homebuilders/dealers with a focus on major metro areas as well as home center retail chains like Home Depot (HD) and Lowe's (LOW).
CEO Cary Dunston said that the company "experienced solid growth in the builder channel, and independent dealer and distributor channel" but that "the home center channel proved to be challenging." Dunston nevertheless adopted a positive view in the face of acknowledged headwinds, saying, "Despite the quarter-to-quarter uncertainty in the market, we remain very confident in the underlying industry fundamentals and our ability to grow in all channels."
Something to be aware of is that AMWD made a large acquisition in December 2017 when it acquired RSI, which specializes in value-based cabinets. It focuses largely on the home center channel, and that seems to be where the weakness in the market resides right now. As such, that seems to be weighing on AMWD's AprQ report.
Investors should note that AMWD can be hit-or-miss when it comes to its earnings results. Over the last eight quarters, the company has missed EPS estimates half the time, which is a lot. Part of this is because home remodeling and homebuilding can be volatile markets from quarter-to-quarter. Also, AMWD's decision to not provide guidance makes it more difficult for sell side analysts to model for each quarter.
In sum, investors may be surprised that the stock is ticking slightly higher despite an EPS miss and a pretty large revenue miss. However, our sense is that investors understand that AMWD's results are difficult to forecast. Also, the home center weakness is not a huge surprise as AMWD was cautious on that sales channel last quarter as well. Hopefully, there will be improvement in FY20 and JulQ as we head into the key summer building months.