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Mohawk's (MHK) Q2 Earnings and Revenues Miss Expectations
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Mohawk Industries, Inc.’s (MHK - Free Report) second-quarter 2018 adjusted earnings per share (EPS) of $3.51 missed the Zacks Consensus Estimate of $3.88 by 9.5%. The bottom line also decreased 6% year over year. The results were negatively impacted by input cost inflation, higher transportation costs, a stronger dollar and tight labor market. Additionally, changing product mix, timing of price increases, lower production units, start-up of new projects and the delayed Godfrey Hirst closing also added to the woes.
Moreover, total revenues of $2.58 billion fell shy of expectations by 0.04% but increased 5% year over year on higher sales across all segments.
To combat the above-mentioned headwinds, the company plans to boost prices, expand in growing channels, introduce new products as well as foray into geographies. In the U.S. market, Mohawk expects to increase LVT production and sourcing, as LVT continues to gain market share.
Operating Highlights
Adjusted gross profit of $778.8 million decreased 2.9% year over year. Adjusted selling, general and administrative (SG&A) expenses increased 3.7% to $436.2 million from the prior-year quarter.
Adjusted operating income of $342.5 million declined 10.2% year over year.
Mohawk Industries, Inc. Price, Consensus and EPS Surprise
Global Ceramic: Net sales at this segment amounted to $929.3 million, increasing 3% year over year on a reported basis and 2% on a constant currency basis. The company’s North American ceramic volume recorded an improvement but average price weakened due to growth in lower value products and channels.
Flooring North America: The segment’s net sales totaled $1,057.6 million, up 2% year over year on strong residential carpet sales.
Flooring Rest of the World: Net sales increased 16% year over year to $590.1 million. On a constant currency basis, sales improved 8%, attributable to improved price, product mix and productivity.
Q3 Guidance
Overall, Mohawk expects third-quarter earnings (excluding one-time charges) in the range of $3.54-$3.64 per share.
To counter the higher input costs incurred, Mohawk has planned to undertake a comprehensive approach to improve its performance and profitability in the United States. The company expects to increase pricing, improve sales in growing channels and reduce cost, which is expected to aid the second half of 2018.
However, Mohawk does not anticipate these actions in the United States to materially benefit the company before 2019, given the impact of inflation, timing of price increases and other challenges.
The company expects continued strength in Europe and Russia, where inflation and shifting product preferences are less intense than in the United States. Internationally, Mohawk has been introducing new products and entering new geographies, as well as expanding constrained categories. With the completion of Godfrey Hirst acquisition, Mohawk is expected to become a leading provider of flooring products in Australia and New Zealand.
In the United States, the company is investing in growing categories such as LVT and quartz countertops.
Libbey’s earnings are anticipated to grow 311.1% this year.
Johnson Outdoors’ earnings are expected to grow 31.5% this year.
Pool Corp’s 2018 earnings are expected to grow 38.9%.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
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Mohawk's (MHK) Q2 Earnings and Revenues Miss Expectations
Mohawk Industries, Inc.’s (MHK - Free Report) second-quarter 2018 adjusted earnings per share (EPS) of $3.51 missed the Zacks Consensus Estimate of $3.88 by 9.5%. The bottom line also decreased 6% year over year. The results were negatively impacted by input cost inflation, higher transportation costs, a stronger dollar and tight labor market. Additionally, changing product mix, timing of price increases, lower production units, start-up of new projects and the delayed Godfrey Hirst closing also added to the woes.
Moreover, total revenues of $2.58 billion fell shy of expectations by 0.04% but increased 5% year over year on higher sales across all segments.
To combat the above-mentioned headwinds, the company plans to boost prices, expand in growing channels, introduce new products as well as foray into geographies. In the U.S. market, Mohawk expects to increase LVT production and sourcing, as LVT continues to gain market share.
Operating Highlights
Adjusted gross profit of $778.8 million decreased 2.9% year over year. Adjusted selling, general and administrative (SG&A) expenses increased 3.7% to $436.2 million from the prior-year quarter.
Adjusted operating income of $342.5 million declined 10.2% year over year.
Mohawk Industries, Inc. Price, Consensus and EPS Surprise
Mohawk Industries, Inc. Price, Consensus and EPS Surprise | Mohawk Industries, Inc. Quote
Segment Details
Global Ceramic: Net sales at this segment amounted to $929.3 million, increasing 3% year over year on a reported basis and 2% on a constant currency basis. The company’s North American ceramic volume recorded an improvement but average price weakened due to growth in lower value products and channels.
Flooring North America: The segment’s net sales totaled $1,057.6 million, up 2% year over year on strong residential carpet sales.
Flooring Rest of the World: Net sales increased 16% year over year to $590.1 million. On a constant currency basis, sales improved 8%, attributable to improved price, product mix and productivity.
Q3 Guidance
Overall, Mohawk expects third-quarter earnings (excluding one-time charges) in the range of $3.54-$3.64 per share.
To counter the higher input costs incurred, Mohawk has planned to undertake a comprehensive approach to improve its performance and profitability in the United States. The company expects to increase pricing, improve sales in growing channels and reduce cost, which is expected to aid the second half of 2018.
However, Mohawk does not anticipate these actions in the United States to materially benefit the company before 2019, given the impact of inflation, timing of price increases and other challenges.
The company expects continued strength in Europe and Russia, where inflation and shifting product preferences are less intense than in the United States. Internationally, Mohawk has been introducing new products and entering new geographies, as well as expanding constrained categories. With the completion of Godfrey Hirst acquisition, Mohawk is expected to become a leading provider of flooring products in Australia and New Zealand.
In the United States, the company is investing in growing categories such as LVT and quartz countertops.
Zacks Rank
Currently, Mohawk carries a Zacks Rank #4 (Sell).
Stocks to Consider
Some better-ranked stocks in the Consumer Discretionary sector include Libbey Inc. , Johnson Outdoors Inc. (JOUT - Free Report) and Pool Corporation (POOL - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Libbey’s earnings are anticipated to grow 311.1% this year.
Johnson Outdoors’ earnings are expected to grow 31.5% this year.
Pool Corp’s 2018 earnings are expected to grow 38.9%.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>