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Masco Corporation (MAS), Fortune Brands Home & Security Inc (FBHS), American Woodmark Corporation (AMWD): Can’t Go Wrong Owning Cabinetmakers in a Housing Recovery

Cabinets are this company’s specialty

While the other two companies are diversified, American Woodmark Corporation (NASDAQ:AMWD) specializes in cabinets for kitchens and bathrooms. The company sells more than 435 cabinet lines in a wide variety of design materials and finishes. American Woodmark Corporation (NASDAQ:AMWD) sells its cabinets through a network of independent dealers and distributors as well directly to major builders, Lowe’s, and The Home Depot, Inc. (NYSE:HD). The company has nine manufacturing facilities and builder service centers in the U.S.

In its most recent quarter, net sales rose 26% to $171.1 million. The company earned $0.34 per share compared to a loss of $0.11 per share in the prior year. Gross profit in the quarter amounted to 18.9% of net sales.

American Woodmark Corporation (NASDAQ:AMWD) is benefiting from the tailwinds in the housing industry. Last year, the housing rebound helped boost new construction sales by 40% for American Woodmark Corporation (NASDAQ:AMWD). American Woodmark Corporation (NASDAQ:AMWD) has expanded its dealer network and gained market share in the new-home construction sector. Double-digit sales gains are likely to continue as housing continues to recover.

Foolish assessment

For 2012, housing starts were 780,000. This was an increase of 28.1% from 2011 where builders started only 608,800 homes. In May housing starts rose to 914,000. Housing starts are heading it the right direction, but the cabinetmakers are eager for a return to pre-crisis levels. If housing starts return to pre-crisis levels of 1.4 million to 1.5 million, housing starts would double from last year’s level and significantly benefit these cabinetmakers.

Of the three companies, my favorite is Fortune Brands Home & Security Inc (NYSE:FBHS). The acquisition of Woodcrafters was a great move and will give the company a low-cost manufacturing facility in Mexico. I like its brand portfolio and have been a buyer of the company’s products.

Masco Corporation (NYSE:MAS) would be my second favorite due to its diversification. American Woodmark Corporation (NASDAQ:AMWD) is dependent solely on cabinet sales. Masco can see greater benefits with a diversified product base in a housing recovery.

The article Can’t Go Wrong Owning Cabinetmakers in a Housing Recovery originally appeared on Fool.com and is written by Mark Yagalla.

Mark Yagalla has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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