Cabinet manufacturing company American Woodmark (NASDAQ: AMWD) missed Wall Street’s revenue expectations in Q4 CY2024, with sales falling 5.8% year on year to $397.6 million. Its non-GAAP profit of $1.05 per share was 20.2% below analysts’ consensus estimates.

Is now the time to buy American Woodmark? Find out by accessing our full research report, it’s free.

“Despite performance that was below our expectations for the quarter, our teams continue to execute and have built a platform to deliver profitable growth when macroeconomic conditions improve. The quarter was impacted by softer demand in the remodel market and a decline in new construction single family activity as inventories were reduced,” said Scott Culbreth, President and CEO.

Company Overview

Starting as a small millwork shop, American Woodmark (NASDAQ: AMWD) is a cabinet manufacturing company that helps customers from inspiration to installation.

Home Construction Materials

Traditionally, home construction materials companies have built economic moats with expertise in specialized areas, brand recognition, and strong relationships with contractors. More recently, advances to address labor availability and job site productivity have spurred innovation that is driving incremental demand. However, these companies are at the whim of residential construction volumes, which tend to be cyclical and can be impacted heavily by economic factors such as interest rates. Additionally, the costs of raw materials can be driven by a myriad of worldwide factors and greatly influence the profitability of home construction materials companies.

Sales Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, American Woodmark’s 1.2% annualized revenue growth over the last five years was weak. This fell short of our benchmarks and is a poor baseline for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. American Woodmark’s history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 8.1% annually.

This quarter, American Woodmark missed Wall Street’s estimates and reported a rather uninspiring 5.8% year-on-year revenue decline, generating $397.6 million of revenue.

Looking ahead, sell-side analysts expect revenue to grow 2.2% over the next 12 months. While this projection suggests its newer products and services will spur better top-line performance, it is still below the sector average.

Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we’ve identified a relatively under-the-radar profitable growth stock benefiting from the rise of AI, available to you FREE via this link.

Operating Margin

American Woodmark was profitable over the last five years but held back by its large cost base. Its average operating margin of 6.4% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

On the plus side, American Woodmark’s operating margin rose by 1.3 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, American Woodmark generated an operating profit margin of 5.3%, down 1.3 percentage points year on year. Conversely, its gross margin actually rose, so we can assume its recent inefficiencies were driven by increased operating expenses like marketing, R&D, and administrative overhead.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for American Woodmark, its EPS declined by 1.2% annually over the last five years while its revenue grew by 1.2%. However, its operating margin actually expanded during this time and it repurchased its shares, telling us the delta came from reduced interest expenses or taxes.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

Although it wasn’t great, American Woodmark’s flat two-year EPS performance topped its two-year revenue performance.

In Q4, American Woodmark reported EPS at $1.05, down from $1.66 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects American Woodmark’s full-year EPS of $6.71 to grow 12.8%.

Key Takeaways from American Woodmark’s Q4 Results

We struggled to find many positives in these results. Its full-year EBITDA guidance missed significantly and its revenue fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 4.8% to $67.77 immediately after reporting.

American Woodmark may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.