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Why American Woodmark Corporation Plunged Today

By Brian D. Pacampara, CFA – Feb 18, 2014 at 2:43PM

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Is this meaningful or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of kitchen cabinet company American Woodmark Corporation (AMWD 4.88%) sank 12% today after its quarterly results disappointed Wall Street.

So what: The stock has been volatile over the past year on housing market uncertainty, and today's Q3 earnings miss -- EPS of $0.18 versus the consensus of $0.27 -- only reinforces those doubts. While revenue increased a solid 11.6%, gross margins slipped slightly over the year-ago period, suggesting that its competitive position is getting a bit more expensive to maintain.

Now what: I'd look into today's pullback as a possible entry point due to the company's much-improved cash position. "The improvement in the Company's cash from operating activities was driven primarily by higher operating profitability, lower increases in inventory levels to support higher sales, timing associated with the payment of various accrued liabilities, and lower pension contributions," said American Woodmark in a statement. So while conservative investors might be turned off by American Woodmark's exposure to the volatile housing market, its strengthening financial position and suddenly weak stock price might be attractive to enterprising contrarians. 

Brian Pacampara has no position in any stocks mentioned, and neither does The Motley Fool. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Stocks Mentioned

American Woodmark Stock Quote
American Woodmark
$53.33 (4.88%) $2.48

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