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Why Is Mohawk Industries (MHK) Up 7.3% Since the Last Earnings Report?
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A month has gone by since the last earnings report for Mohawk Industries, Inc. (MHK - Free Report) . Shares have added about 7.3% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Mohawk Industries’ adjusted earnings of $3.26 per share beat the Zacks Consensus Estimate of $3.22 by 1.2%. Adjusted earnings exclude restructuring, acquisition and other charges. Earnings also increased 16% year over year backed by strong operating margins.
Earnings in full-year 2016 were $12.61 per share, reflecting an increase of 23.6% from the year-ago profit level of $10.20.
Total revenue of $2,182.6 million surpassed the Zacks Consensus Estimate of $2,146 million by 1.7%. Revenues also increased 9.2% year over year on higher sales across all the segments.
Full-year 2016 revenues came in at $8.96 billion, compared with $8.07 billion a year ago, reflecting an 11% increase.
Operating Highlights
Adjusted gross profit (excluding acquisition impact) of $695.6 million increased 9% year over year.
Adjusted selling, general and administrative (SG&A) expenses were up 5.9% to $381.7 million from the prior-year quarter.
Adjusted operating income at a constant exchange rate increased 17.7% to $326.6 million. Adjusted operating margin grew 110 basis points (bps) to 15%, mainly because of higher sales volume and productivity.
Segment Details
Global Ceramic: Net sales at this segment amounted to $749.1 million, up 5.3% year over year on a constant days and constant currency basis. The North American ceramic business gained traction during the quarter. New home construction, home center and the commercial sector outperformed. Internationally, Mexico is noteworthy.
Flooring North America: Net sales at this segment totaled $970.1 million, up 10% year over year. On a constant days basis, sales improved 8.5% driven by strong residential carpet sales despite lower selling prices from channel mix and growth in polyester.
Flooring Rest of the World: Net sales at this segment increased 14% year over year to $463.3 million. On a constant currency basis, sales improved 7% on solid sales of LVT, laminate and insulation products.
2017 Guidance
The company anticipates strong sales growth in 2017, with a slight improvement in operating margins (excluding acquisitions and intellectual property). Meanwhile, Mohawk will absorb approximately $45 million in start-up manufacturing and related marketing expenses this year along with other cost inflation.
In order to achieve long-term growth, the company is expanding its differentiated product line and working on the capacity and efficiency of its operations.
Mohawk Industries is also introducing distinctive collections to boost sales. It is aggressively implementing productivity improvements across all businesses and bringing new capacity online to support growth.
The company is currently exploring numerous investment options to ramp up expansion, including green field opportunities and acquisitions.
Taking these factors into account, the EPS guidance for the first quarter is at $2.64 to $2.73, which represents a 11% to 15% increase year over year.
First Quarter Guidance
The company projects EPS in the band of $2.64 to $2.73. This represents an 11% to 15% increase year over year.
Tax rate is expected in the 26.0–26.5% range.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one downward revision for the current quarter.
At this time, Mohawk Industries' stock has a nice Growth score of 'B', though it is lagging a bit on the momentum front with a 'C'. Charting a somewhat similar path, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for growth investors than momentum and value investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of these revisions also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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Why Is Mohawk Industries (MHK) Up 7.3% Since the Last Earnings Report?
A month has gone by since the last earnings report for Mohawk Industries, Inc. (MHK - Free Report) . Shares have added about 7.3% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Mohawk Industries Tops Q4 Earnings, Issues Q1 View
Mohawk Industries’ adjusted earnings of $3.26 per share beat the Zacks Consensus Estimate of $3.22 by 1.2%. Adjusted earnings exclude restructuring, acquisition and other charges. Earnings also increased 16% year over year backed by strong operating margins.
Earnings in full-year 2016 were $12.61 per share, reflecting an increase of 23.6% from the year-ago profit level of $10.20.
Total revenue of $2,182.6 million surpassed the Zacks Consensus Estimate of $2,146 million by 1.7%. Revenues also increased 9.2% year over year on higher sales across all the segments.
Full-year 2016 revenues came in at $8.96 billion, compared with $8.07 billion a year ago, reflecting an 11% increase.
Operating Highlights
Adjusted gross profit (excluding acquisition impact) of $695.6 million increased 9% year over year.
Adjusted selling, general and administrative (SG&A) expenses were up 5.9% to $381.7 million from the prior-year quarter.
Adjusted operating income at a constant exchange rate increased 17.7% to $326.6 million.
Adjusted operating margin grew 110 basis points (bps) to 15%, mainly because of higher sales volume and productivity.
Segment Details
Global Ceramic: Net sales at this segment amounted to $749.1 million, up 5.3% year over year on a constant days and constant currency basis. The North American ceramic business gained traction during the quarter. New home construction, home center and the commercial sector outperformed. Internationally, Mexico is noteworthy.
Flooring North America: Net sales at this segment totaled $970.1 million, up 10% year over year. On a constant days basis, sales improved 8.5% driven by strong residential carpet sales despite lower selling prices from channel mix and growth in polyester.
Flooring Rest of the World: Net sales at this segment increased 14% year over year to $463.3 million. On a constant currency basis, sales improved 7% on solid sales of LVT, laminate and insulation products.
2017 Guidance
The company anticipates strong sales growth in 2017, with a slight improvement in operating margins (excluding acquisitions and intellectual property). Meanwhile, Mohawk will absorb approximately $45 million in start-up manufacturing and related marketing expenses this year along with other cost inflation.
In order to achieve long-term growth, the company is expanding its differentiated product line and working on the capacity and efficiency of its operations.
Mohawk Industries is also introducing distinctive collections to boost sales. It is aggressively implementing productivity improvements across all businesses and bringing new capacity online to support growth.
The company is currently exploring numerous investment options to ramp up expansion, including green field opportunities and acquisitions.
Taking these factors into account, the EPS guidance for the first quarter is at $2.64 to $2.73, which represents a 11% to 15% increase year over year.
First Quarter Guidance
The company projects EPS in the band of $2.64 to $2.73. This represents an 11% to 15% increase year over year.
Tax rate is expected in the 26.0–26.5% range.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one downward revision for the current quarter.
Mohawk Industries, Inc. Price and Consensus
Mohawk Industries, Inc. Price and Consensus | Mohawk Industries, Inc. Quote
VGM Scores
At this time, Mohawk Industries' stock has a nice Growth score of 'B', though it is lagging a bit on the momentum front with a 'C'. Charting a somewhat similar path, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for growth investors than momentum and value investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of these revisions also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.