Baird raises American Woodmark stock to Outperform, sees promising future

On Thursday, Baird made a positive adjustment to American Woodmark (NASDAQ:) Corporation’s stock (NASDAQ:AMWD), upgrading its rating from Neutral to Outperform and increasing the price target to $120 from the previous $105. The firm sees a promising future for the company, citing several factors that could contribute to its growth and financial performance.

The upgrade is based on the expectation that American Woodmark will continue to gain market share, propelled by new construction wallet share gains, dealer expansion, and improvements in service and capacity. Baird anticipates that these factors, along with a higher mix of new construction business, will provide the company with a unique growth opportunity.

Baird’s analysis suggests potential for earnings to surpass expectations in fiscal years 2024 and 2025, noting that their estimates are higher than the consensus on Wall Street. The recent reduction in debt is also highlighted as a positive development, as it may offer the company more flexibility in capital deployment.

The valuation of American Woodmark’s stock is considered to be appealing as well, being described as “undemanding” and below historical averages. Baird believes that the potential for valuation expansion exists, supported by improving end markets, market share gains, and enhanced execution of business strategies.

The risk/reward profile for American Woodmark is also deemed favorable, with a near-term price range estimated between $78 and $158. This assessment underpins Baird’s decision to upgrade the stock, reflecting confidence in the company’s future prospects.

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