It's not easy for companies tied to the housing industry these days, so when cabinetmaker American Woodmark (Nasdaq: AMWD) reports its fiscal third-quarter 2008 earnings on Tuesday, we won't be expecting much. But hey, people need to start buying houses again someday, right? Best keep an eye on this company against the day that happens.

What analysts say:

  • Buy, sell, or waffle? Five analysts track Woodmark today, one more than last quarter. The stock now carries one buy rating, three holds, and a sell.
  • Revenue. On average, they expect to see sales drop 15% to $137.3 million.
  • Earnings. There probably won't be any. Breakeven profits are predicted.

What management says:
We've already covered Woodmark's rough start this fiscal year. In short, sales fell 25% year over year as the housing debacle deepened. Last quarter was even worse.

And if that's not enough bad news for you, get a load of what Woodmark says the rest of the year could hold: conceivably, sales down 18% versus fiscal 2007, gross margins of 18.5%, and earnings of as little as $0.70 per share.

What management does:
How do we get to that point over the next two reports? By continuing these downward trends in margins:

Margins

7/06

10/06

1/07

4/07

7/07

10/07

Gross

19.2%

20.3%

20.6%

20.5%

20%

19.3%

Operating

7.4%

8%

7.6%

6.5%

5.1%

3.5%

Net

4.6%

5%

4.9%

4.3%

3.4%

2.5%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Working the keys on my calculator, Woodmark seems to be positing year-over-year gross margin slippage of about 200 basis points (for all of fiscal 2008). Netting $0.70 per share on the share count last reported would result in roughly $10.1 million in profits. Arriving at that from an 18% sales decline (to $624 million) would give us a net margin of 1.6% -- producing a 270-basis point decline in the net.

How far we are from that nadir of expectations? We'll get a good clue on that Tuesday. With $326 million in sales already booked through H1 2008, anything greater than $300 million sold during H2 this year should yield a better-than-worst result for the year. Given that sales have historically been weighted toward Q4 and Q1 at Woodmark, I'd say that if we see something in the neighborhood of $150 million in sales, it'll make for good news.

On the other hand, if you see anything at or below the consensus estimate, head for the hills. Then wait there, in hopes that Woodmark's two key customers, Lowe's (NYSE: LOW) and Home Depot (NYSE: HD), will say something optimistic when they report earnings later this month.

What did we expect to see at American Woodmark last quarter, and what did we get? Find out in:

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Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool's disclosure policy is perfectly square.