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Mohawk Industries (MHK) Up 11.6% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Mohawk Industries (MHK - Free Report) . Shares have added about 11.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Mohawk Industries due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Mohawk Industries, Inc. reported mixed first-quarter 2019 results, wherein earnings surpassed the Zacks Consensus Estimate, while revenues missed the same.
The company’s adjusted earnings per share (EPS) of $2.13 topped the Zacks Consensus Estimate of $2.07 by 2.9%. However, the reported figure decreased 29.2% year over year. The results were negatively impacted by input cost inflation, a stronger dollar, softer market conditions in most of the regions served by the company and declining product mix. Also, uneven demand across the markets served added to the woes.
Net sales of $2.44 billion fell shy of expectations by 2% but increased 1.3% year over year. Net sales were up 6% on a constant-currency and days basis.
To combat the above-mentioned headwinds, Mohawk has reduced the production rates to balance the inventory level with customers’ demand. Additionally, it has plans to boost prices to offset higher energy and material cost inflation, replace high-cost assets, enhance manufacturing processes, as well as reduce overhead expenses.
Operating Highlights
Adjusted gross profit of $663.1 million decreased 8% year over year. Adjusted selling, general and administrative (SG&A) expenses increased 6.5% from the prior-year quarter to $456.5 million.
Adjusted operating income of $206.6 million declined 29.2% year over year.
Segment Details
Global Ceramic: Net sales at the segment totaled $898.4 million, increasing 2.5% year over year, and 7% on a constant currency and days basis. However, the segment’s operating margin remained under pressure due to inflation, temporary shutdown costs and marketing investments, partially offset by productivity.
Flooring North America: Net sales from the segment totaled $922 million, down 3% year over year. The segment's operating margin was impacted by lower volume, inventory reductions, high material costs and LVT manufacturing variances.
Flooring Rest of the World: Net sales increased 6.3% year over year to $622.2 million. Sales improved 16% on a constant-currency and days basis. Operating margins also improved from the prior-year quarter, attributable to volume growth and lower inflation, partially offset by unfavorable price and mix, and productivity.
Second-Quarter View
Mohawk remains confident about its performance going forward as the U.S. housing market and material cost inflation are showing signs of improvement. The company has taken certain actions to improve LVT manufacturing, U.S. carpet and ceramic performance, as well as increase the utilization of its new investments. The company is focused on further increasing prices to offset inflation and restore margins.
Backed by the above-mentioned initiatives, Mohawk expects second-quarter 2019 earnings (excluding one-time charges) in the range of $2.81-$2.91 per share (versus $3.51 in the year-ago period).
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -7.42% due to these changes.
VGM Scores
Currently, Mohawk Industries has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile 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.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Mohawk Industries has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Mohawk Industries (MHK) Up 11.6% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Mohawk Industries (MHK - Free Report) . Shares have added about 11.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Mohawk Industries due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Mohawk's (MHK - Free Report) Q1 Earnings Beat Estimates, Revenues Miss
Mohawk Industries, Inc. reported mixed first-quarter 2019 results, wherein earnings surpassed the Zacks Consensus Estimate, while revenues missed the same.
The company’s adjusted earnings per share (EPS) of $2.13 topped the Zacks Consensus Estimate of $2.07 by 2.9%. However, the reported figure decreased 29.2% year over year. The results were negatively impacted by input cost inflation, a stronger dollar, softer market conditions in most of the regions served by the company and declining product mix. Also, uneven demand across the markets served added to the woes.
Net sales of $2.44 billion fell shy of expectations by 2% but increased 1.3% year over year. Net sales were up 6% on a constant-currency and days basis.
To combat the above-mentioned headwinds, Mohawk has reduced the production rates to balance the inventory level with customers’ demand. Additionally, it has plans to boost prices to offset higher energy and material cost inflation, replace high-cost assets, enhance manufacturing processes, as well as reduce overhead expenses.
Operating Highlights
Adjusted gross profit of $663.1 million decreased 8% year over year. Adjusted selling, general and administrative (SG&A) expenses increased 6.5% from the prior-year quarter to $456.5 million.
Adjusted operating income of $206.6 million declined 29.2% year over year.
Segment Details
Global Ceramic: Net sales at the segment totaled $898.4 million, increasing 2.5% year over year, and 7% on a constant currency and days basis. However, the segment’s operating margin remained under pressure due to inflation, temporary shutdown costs and marketing investments, partially offset by productivity.
Flooring North America: Net sales from the segment totaled $922 million, down 3% year over year. The segment's operating margin was impacted by lower volume, inventory reductions, high material costs and LVT manufacturing variances.
Flooring Rest of the World: Net sales increased 6.3% year over year to $622.2 million. Sales improved 16% on a constant-currency and days basis. Operating margins also improved from the prior-year quarter, attributable to volume growth and lower inflation, partially offset by unfavorable price and mix, and productivity.
Second-Quarter View
Mohawk remains confident about its performance going forward as the U.S. housing market and material cost inflation are showing signs of improvement. The company has taken certain actions to improve LVT manufacturing, U.S. carpet and ceramic performance, as well as increase the utilization of its new investments. The company is focused on further increasing prices to offset inflation and restore margins.
Backed by the above-mentioned initiatives, Mohawk expects second-quarter 2019 earnings (excluding one-time charges) in the range of $2.81-$2.91 per share (versus $3.51 in the year-ago period).
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -7.42% due to these changes.
VGM Scores
Currently, Mohawk Industries has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile 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.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Mohawk Industries has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.