Baird Says Pullback In American Woodmark Offers Entry Opportunity

Baird has upgraded American Woodmark Corporation

to Outperform, saying the 16 percent drop after the company's lower-than-expected earnings provides attractive entry point. Analyst Timothy Wojs noted that the company's structural margin opportunity remains intact, coupled with strong cyclical backdrop and execution. Wojs also noted the company's cheap valuation versus peers despite stronger growth profile and flexible net cash position. "While acknowledging near-term margin impacts (investments, raws. depreciation, promotions), we view as transitory, and our estimate trim (6%) was much less than the stock move. Risk/reward too difficult to ignore (3:1 up/down)," Wojs wrote in a note. American Woodmark anticipates F2017 revenue growth in low-teens (vs. Baird's prior +9 percent estimate) and EBIT margins to be flat yoy. Wojs cut his fiscal 2017 EPS view to $3.95 from $4.18, while Street estimates EPS of $4.27. "Incremental depreciation and product launch costs are timing related and should cycle through as F2017 progresses. While impacted near-term, we believe operating leverage can normalize in H2-17 and into F2018," Wojs highlighted. At the time of writing, shares of American Woodmark rose 3.48 percent to $69.94. Wojs has a price target of $78.