American Woodmark reported excellent quarterly results thanks to strong growth in home remodeling market. As a result, earnings estimates have surged, sending this cabinet maker to Zacks rank #1 (Strong Buy).
 
About the Company
 
American Woodmark Corporation (AMWD - Snapshot Report) is a leading manufacturer and distributor of kitchen and bath cabinets for remodeling and new home construction markets.
 
The company manufactures cabinets under five major brands:  American Woodmark, Timberlake Cabinetry, Shenandoah Cabinetry, Shenandoah Value Series and Waypoint Living Spaces and sells more than 613 cabinet lines in a wide variety of design materials and finishes. 
 
Its products are sold through a network of independent dealers and distributors, and directly to major builders and Lowe's and The Home Depot. The company operates nine manufacturing facilities and seven service centers across the country.
 
Remodeling Activity Picking Up 
 
According to a report by the Harvard University Joint Center for Housing Studies, spending in the U.S. remodeling market will grow by 4% to 5% this year to at least $330 billion, making 2015 the best year for remodeling spending of the past 15 years, ahead the previous high of $324 billion spending in 2007. It says that with the easing of home price appreciation, homeowners are less likely to invest in costly renovations but they will continue to spend on discretionary renovations including kitchen and bathroom upgrades.
 
Home Improvement/Furniture Industry Keeps Shining
 
The Furniture Industry is currently #22 out of 265 (top 8%) on the Zacks Industry Rank list, as a result of positive earnings revisions trend.
 
As the economy picks up momentum and the job market heals further, discretionary spending on home improvement products will continue to rise.
 

Excellent Quarterly Results
 
The company reported its third fiscal quarter results on February 26, 2015. Net sales rose by 12% compared with the same quarter of prior fiscal year to $189.0 million. Net income came in at $7.3 million, or $0.45 per share, compared with income of $2.9 million or $0.04 per share for the prior-year quarter.
 
Adjusted net income of $0.44 per share was substantially ahead of the Zacks Consensus Estimate of $0.35 per share. The company has beaten Zacks Consensus Estimate in three out of last four quarters, with an average quarterly surprise of 8%.
 
The company's gross profit margin for quarter was 18.6% of net sales, up from 15.4% in the same quarter of the prior year. Results benefited from higher sales volume and improved operating efficiency.
 
Estimates Revisions

As a result of strong quarterly report, analysts have raised their estimates for the company. Zacks Consensus Estimates for the current and the next fiscal year now stand at $2.01 per share and $2.42 per share, up from $1.84 per share and $2.12 per share, 30 days ago.

Rising estimates sent AMWD back to a Zacks Rank#1 (Strong Buy) last month.

The Bottom Line
 
The home remodeling market continues on its growth trajectory. AMWD is a Zacks Rank#1 (Strong Buy) stock. And with the top industry rank, it has a strong likelihood of outperformance in the short- to medium- term.