Buy LoJack, Hold American Woodmark

LOJACK CORP. $20.90 (Nasdaq symbol LOJN; SI Rating: Speculative) (www.lojack.com; 1-781-326-4700; Shares outstanding: 18.8 million; Market cap: $393.5 million) sells vehicle theft recovery systems. The company has two main products: the LoJack Vehicle Recovery System and the LoJack Early Warning System. LoJack operates in the U.S. and 29 other countries around the world. In Canada, the company operates through its subsidiary, Boomerang Tracking.

LoJack’s recovery systems use radio frequency technology to track stolen vehicles. Once a customer realizes a vehicle is stolen, they contact police. Local police cruisers and aircraft equipped with LoJack technology (supplied at no cost by LoJack to law enforcement agencies) are led to the tracking device.

In the three months ended June 30, 2007, LoJack’s sales rose 2.6%, to $58.2 million from $56.7 million. However, earnings rose 21.8%, to $6.7 million or $0.35 a share, from $5.5 million or $0.29. That’s because it has successfully cut costs, in manufacturing as well as other areas. Cash flow rose 28.6%, to $9.7 million or $0.51 a share, from $7.5 million or $0.39.

New markets provide growth

To broaden its markets, LoJack has successfully expanded into new areas. It now offers LoJack For Motorcycles. It’s also active in the area of tracking stolen construction equipment, as well as cargo and freight tracking and recovery.

International markets are also a growth area for the company, particularly in Latin America and Europe. LoJack’s European Recovery Network now extends from Italy and France to the UK, Spain, Germany, Poland and Russia.

LoJack is still a buy.

AMERICAN WOODMARK $28.03 (Nasdaq symbol AMWD; SI Rating: Speculative) (540-665- 9100;www.americanwoodmark.com; Shares outstanding: 14.9 million; Market cap: $413.8 million) has dropped from around $45 in February, first on slowing housing sales, and now on the expectation of tighter credit conditions.

American Woodmark is the third-largest maker of kitchen and bath cabinets in the United States. It offers more than 230 cabinet lines in a wide variety of designs, materials and finishes. It sells its products through a network of dealers and distributors and directly to home centers and major homebuilders. The company now operates 15 plants and 10 service centers across the U.S.

Results fall on slow housing markets

In the three months ended July 31, 2007, revenues fell 25.4%, to $166.1 million from $222.8 million. The decline came as both remodeling sales and new construction sales fell.

Earnings per share fell 58.5% in the latest quarter, to $0.34 from $0.82 a year earlier. The lower profit came from inefficiencies in labor and overhead costs stemming from lower sales volumes. As well, the company continues to increase spending on sales and marketing to hold market share. This includes enhanced product displays for new customers, launch costs for new products and increased retail promotional costs.

American Woodmark now expects tighter credit conditions in consumer lending markets to continue to hurt remodeling and new construction markets.

The company has lowered its earnings estimate to around $1.55 a share this year, from $2.04. Earnings could suffer further until housing markets recover, but we still see American Woodmark as a hold.