- The Washington Times - Monday, August 27, 2001

Investors have been a fan of Winchester, Va.-based American Woodmark Corp. since its positive earnings announcement in June, and some made tidy profits last week.

American Woodmark shares had been climbing rapidly over the past few months and even hit a 52-week high of $50.77 on Tuesday. But last Wednesday the price dipped and kept falling as many investors chose to take a profit. Shares of American Woodmark closed at $44.05 on the New York Stock Exchange on Friday.

"I really don't have any reason why the stock is moving the way it's moving," says Glenn Eanes, American Woodmark's vice president and treasurer. "While we appreciated the run-up, we don't really understand why it ran to the fifty when it did."

Analysts attribute the movement to the thinly traded nature of American Woodmark's stock, which makes any activity by investors very visible. Shrewd investors were able to run up the price and then take a profit.

"Any kind of hiccup will appear magnified," says Sam Darkatsh, an analyst with Raymond James.

American Woodmark's last quarterly earnings report, released in June, was positive. The company announced a 119 percent increase in revenue during the previous year. Following that announcement, the company's stock price held steady for several weeks before climbing almost daily until the middle of last week.

Last week's dip in the stock price comes less than a week before the company plans to issue another quarterly earnings report. Analysts say some investors may be getting out now just in case the report isn't positive. Mr. Eanes won't speculate on the most recent quarter, the results of which will be announced this Wednesday. Analysts expect a postive report.

American Woodmark manufactures and distributes kitchen cabinets and vanities for new homes and remodeling companies. About 60 percent of its sales go to the two leading home improvement stores, Home Depot and Lowe's. The remaining 40 percent of the company's revenue comes from new home builders.

This breakdown in revenue is one of the company's strong points, analysts say. "Even if new construction falls off the table, they'll be fine," Mr. Darkatsh says.

Joel Havard, an analyst with BB&T; Capital Markets says he's seen American Woodmark restructure its business plan slightly so that nearly half of its business goes directly to new home builders and distributors.

"In the past year or so they've just about balanced their business," Mr. Havard says. American Woodmark appears to be benefiting from one strong area of the economy the new home market. The Commerce Department announced Friday that the rate of new home sales increased 4 percent since July of last year.

The department estimates that 950,000 new, single-family homes will be built by the end of the year, a 5 percent increase over last month's year-end estimate. New-home business is especially strong in the Midwest and Sun Belt states, where American Woodmark has significant presence.

Some analysts say that American Woodmark is relatively unaffected by the home-sales market because new homes make up just a fraction of its business.

Analysts say the company has managed to save money by keeping its operations streamlined, while maintaining a small inventory. All its kitchen cabinets are manufactured only after orders are placed, thus saving the company money on storage. This system also reduces the number of cabinets that can become damaged in warehouses, Mr. Eanes says.


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