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Mohawk's (MHK) Shares Rise on Q3 Earnings and Revenue Beat
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Mohawk Industries, Inc. (MHK - Free Report) reported solid third-quarter 2020 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate. Shares of this leading global manufacturer of flooring products gained 11.2% in the after-hour trading session post the earnings release.
As highlighted by Jeffrey S. Lorberbaum, chairman and CEO of Mohawk, “All of our businesses and geographies were stronger due to higher demand and customers increasing inventory in our distribution channels.” He added, “Under continued pandemic conditions, people all over the world are spending more time in their homes and working remotely. Globally, this trend is increasing investments in home remodeling as well as driving new home purchases.”
Mohawk reported adjusted earnings of $3.26 per share, beating the consensus mark of $2.31 by 41.1%. The metric also improved 18.5% year over year.
Net sales of $2.57 billion surpassed the consensus estimate of $2.5 billion by 2.9% and grew 2% from the year-ago figure. On a constant-currency and days basis, net sales were up 2% year over year.
Mohawk Industries, Inc. Price, Consensus and EPS Surprise
Adjusted gross profit of $729.8 million grew 4.4% year over year. Adjusted selling, general and administrative expenses decreased 3.2% from the prior-year level. Adjusted operating income totaled $295.1 million, which improved 18% year over year.
Segment Details
Global Ceramic: Sales in the segment totaled $911.3 million, down 1% year over year. But, the metric improved 2% on a constant currency and days basis. Adjusted operating income increased to $94.1 million from $84.4 million a year ago due to productivity, higher volume and lower energy costs, partially offset by unfavorable price and mix.
Flooring North America: Net sales at the segment came in at $982.3 million, down 2% year over year. Moreover, the segment registered adjusted operating income of $80.3 million for the quarter, down 7.6% from a year ago. Improvement in productivity and reduction in inflation were offset by lower volume, and unfavorable price and mix.
Flooring Rest of the World: Net sales in the segment increased 13.4% year over year to $681.3 million. On a constant-currency basis, sales were up 10% from the year-ago level. Adjusted operating income was $131.2 million, up 50% from a year ago. The upside was attributable to strengthening volume and productivity as well as favorable material costs. This was partly offset by unfavorable price and mix.
Financial Highlights
As of Sep 26, 2020, cash and cash equivalents were $781.2 million compared with $737.7 million in the second quarter of 2020. For the third quarter, the company generated free cash flow of $529.4 million, up from $287.2 million a year ago. Long-term debt, less current portion at the end of third quarter, was $2.3 billion.
Fourth-Quarter View
The company has been experiencing improved sales and margin trends as it has entered the fourth quarter and has a solid order backlog across the enterprise. Residential remodeling and new home construction are expected to remain strong as the pandemic has transformed living spaces into schools and offices as participation in other activities has fallen.
The fourth quarter is usually slower for the industry it serves due to normal seasonality, with expectations of lower growth in channel inventory levels. The company’s higher margin commercial business will continue to be slow, with completed projects likely to outpace new starts.
It has also been implementing restructuring plans and is on track to reduce costs. Mohawk’s visibility continues to be limited by many uncertainties, including government restrictions. Assuming that the current economic trends continue, it expects fourth-quarter EPS to be $2.75 to $2.87, with a non-recurring tax rate of approximately 5% for the period.
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Mohawk's (MHK) Shares Rise on Q3 Earnings and Revenue Beat
Mohawk Industries, Inc. (MHK - Free Report) reported solid third-quarter 2020 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate. Shares of this leading global manufacturer of flooring products gained 11.2% in the after-hour trading session post the earnings release.
As highlighted by Jeffrey S. Lorberbaum, chairman and CEO of Mohawk, “All of our businesses and geographies were stronger due to higher demand and customers increasing inventory in our distribution channels.” He added, “Under continued pandemic conditions, people all over the world are spending more time in their homes and working remotely. Globally, this trend is increasing investments in home remodeling as well as driving new home purchases.”
Mohawk reported adjusted earnings of $3.26 per share, beating the consensus mark of $2.31 by 41.1%. The metric also improved 18.5% year over year.
Net sales of $2.57 billion surpassed the consensus estimate of $2.5 billion by 2.9% and grew 2% from the year-ago figure. On a constant-currency and days basis, net sales were up 2% year over year.
Mohawk Industries, Inc. Price, Consensus and EPS Surprise
Mohawk Industries, Inc. price-consensus-eps-surprise-chart | Mohawk Industries, Inc. Quote
Operating Highlights
Adjusted gross profit of $729.8 million grew 4.4% year over year. Adjusted selling, general and administrative expenses decreased 3.2% from the prior-year level. Adjusted operating income totaled $295.1 million, which improved 18% year over year.
Segment Details
Global Ceramic: Sales in the segment totaled $911.3 million, down 1% year over year. But, the metric improved 2% on a constant currency and days basis. Adjusted operating income increased to $94.1 million from $84.4 million a year ago due to productivity, higher volume and lower energy costs, partially offset by unfavorable price and mix.
Flooring North America: Net sales at the segment came in at $982.3 million, down 2% year over year. Moreover, the segment registered adjusted operating income of $80.3 million for the quarter, down 7.6% from a year ago. Improvement in productivity and reduction in inflation were offset by lower volume, and unfavorable price and mix.
Flooring Rest of the World: Net sales in the segment increased 13.4% year over year to $681.3 million. On a constant-currency basis, sales were up 10% from the year-ago level. Adjusted operating income was $131.2 million, up 50% from a year ago. The upside was attributable to strengthening volume and productivity as well as favorable material costs. This was partly offset by unfavorable price and mix.
Financial Highlights
As of Sep 26, 2020, cash and cash equivalents were $781.2 million compared with $737.7 million in the second quarter of 2020. For the third quarter, the company generated free cash flow of $529.4 million, up from $287.2 million a year ago. Long-term debt, less current portion at the end of third quarter, was $2.3 billion.
Fourth-Quarter View
The company has been experiencing improved sales and margin trends as it has entered the fourth quarter and has a solid order backlog across the enterprise. Residential remodeling and new home construction are expected to remain strong as the pandemic has transformed living spaces into schools and offices as participation in other activities has fallen.
The fourth quarter is usually slower for the industry it serves due to normal seasonality, with expectations of lower growth in channel inventory levels. The company’s higher margin commercial business will continue to be slow, with completed projects likely to outpace new starts.
It has also been implementing restructuring plans and is on track to reduce costs. Mohawk’s visibility continues to be limited by many uncertainties, including government restrictions. Assuming that the current economic trends continue, it expects fourth-quarter EPS to be $2.75 to $2.87, with a non-recurring tax rate of approximately 5% for the period.
Zacks Rank
Mohawk — which shares space with Culp, Inc (CULP - Free Report) , Interface, Inc. (TILE - Free Report) and Select Interior Concepts, Inc. in the Zacks Textile - Home Furnishing industry — currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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The upcoming election could be a massive buying opportunity for savvy investors. Trillions of dollars will shift into new market sectors after the election. The question is, which sectors will soar for each candidate? Zacks has put together a new special report to help readers like you target big profits.
The 2020 Election Stock Report reveals specific stocks you’ll want to own immediately after the results are announced – 6 if Trump wins, 6 if Biden wins. Past election reports have led investors to gains of +71%, +83%, even +185% in the following months. This year’s picks could be even more lucrative.
Check out Zacks’ 2020 Election Stock Report >>