How Will American Woodmark’s Newly Added Risk Factor Affect its Future Performance?

American Woodmark (AMWD) makes kitchen cabinets and other wood products, targeting the new home construction and remodeling markets. It operates 17 manufacturing sites across the U.S. and Mexico.

Earnings and Stock Repurchase Authorization

American Woodmark recently reported Fiscal 2021 fourth-quarter and full-year results for the period ended April 30. Q4 revenue jumped 18.6% year-over-year to $473.4 million. Full-year revenue increased 5.7% to $1.74 billion.

Net income of $2.8 million for Q4 dropped from $13 million a year ago. Full-year net income of $58.8 million declined from $74.9 million in the previous year. The company attributed the declines in net income to pre-tax losses linked to debt restructuring, costs associated with staff layoffs, and higher material and logistics expenses.

American Woodmark CEO Scott Culbreth commented, “During the fourth quarter of fiscal 2021, our teams delivered exceptional sales growth across all channels and were able to restructure our debt to increase liquidity and reduce interest expense.” (See American Woodmark stock charts on TipRanks).

Alongside the earnings release, American Woodmark announced a new $100 million stock repurchase program. It said repurchases will be subject to factors including market conditions and the company’s cash requirements for other purposes.

American Woodmark Risk Factors 

According to the new Tipranks Risk Factors tool, American Woodmark’s major risk category is Production, accounting for 26% of the 23 risks identified. Finance and Corporate is the next major risk factor category at 22%. The Ability to Sell and Macro and Political are also highlighted as key risk factors at 17% each.

Since its Q4 2020 report, American Woodmark has added one new risk factor under the Macro and Political category. The company says the COVID-19 pandemic has adversely impacted its business and financial performance. It says the pandemic’s continuing impact and the impact that may come from future pandemics could negatively affect its business, operating results, and financial performance.

The Production risk factor sector average stands at 19.9%, compared to American Woodmark’s 26%. The company’s shares are up about 7% over the past year.

Analyst’s Take

In June, Loop Capital analyst Garik Shmois upgraded American Woodmark to a Buy from a Hold and raised the price target to $100 from $94. The analyst’s new price target suggests 27.45% upside potential.

According to Shmois, his cabinet survey findings show that sales growth continued to be strong heading into the second quarter. Also, the findings indicate that dealer traffic levels, which serve as a leading indicator, remained strong. Shmois further notes that commodity cost inflation looks to have hit the peak. The analyst believes sales are likely to exceed expectations because sentiment has become too negative.

Consensus among analysts is a Moderate Buy based on 2 Buys and 1 Hold. The average American Woodmark price target of $99.67 implies approximately 27% upside potential over the next 12 months.

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