What Happened?
Shares of cabinet manufacturing company American Woodmark (NASDAQ: AMWD) jumped 16.1% in the afternoon session after the company announced plans to combine with MasterBrand Inc. in an all-stock merger valued at approximately $2.4 billion. Under the terms of the agreement, American Woodmark shareholders received 5.150 shares of MasterBrand common stock for each share owned. The deal created North America's largest cabinet manufacturer. After the transaction, MasterBrand shareholders owned about 63% of the new entity, with American Woodmark shareholders holding the rest. The companies also projected achieving run-rate cost savings, or synergies, of approximately $90 million by the end of the third year after the merger's completion.
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What Is The Market Telling Us
American Woodmark’s shares are not very volatile and have only had 8 moves greater than 5% over the last year. Moves this big are rare for American Woodmark and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 11 months ago when the stock dropped 12.8% on the news that the company reported second-quarter earnings results with its revenue, EPS, and full-year EBITDA guidance falling short of Wall Street's estimates. Highlighting the drivers of the weak performance, management noted that weak demand in the remodel market, more than offset growth in the new construction market. The near-term guidance for the remodel market was equally bleak, with expectations for continued soft demand. As a result, the full-year revenue guidance was lowered. For FY'25, the company expects low single-digit decline in net sales year-over-year (vs previous guidance of low single-digit net sales increase year-over-year). Overall, this was a weaker quarter.
American Woodmark is down 19.9% since the beginning of the year, and at $63.10 per share, it is trading 38.7% below its 52-week high of $102.94 from November 2024. Investors who bought $1,000 worth of American Woodmark’s shares 5 years ago would now be looking at an investment worth $737.67.
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