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Mohawk (MHK) Up 6.6% Since Earnings Report: Can It Continue?

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More than a month has gone by since the last earnings report for Mohawk Industries, Inc. (MHK - Free Report) . Shares have added about 6.6% 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 drivers.

Third Quarter 2017 Results

Mohawk Industries’ third-quarter 2017 adjusted earnings per share (EPS) of $3.75 beat the Zacks Consensus Estimate of $3.74 by 0.3%. Earnings also increased 7% year over year on higher sales and improved productivity.

Total revenues of $2.4 billion missed the Zacks Consensus Estimate of $2.5 billion by 0.6%. Revenues, however, increased 7% year over year on higher sales across all segments. Also, the company’s international business contributed significantly to revenues, as the economies of those countries expanded. These positives have offset the adverse impact of higher material costs, disruptions from hurricanes and reduced patent revenues.

Operating Highlights

Adjusted gross profit of $795.7 million increased 6.9% year over year. Adjusted operating income rose 8.4% to $397.5 million.

Adjusted selling, general and administrative (SG&A) expenses increased 5.6% to $398.2 million from the prior-year quarter.

Segment Details

Global Ceramic: Net sales at this segment amounted to $893.4 million, up 9% year over year on a reported basis and 7% at constant days and currency. Solid contributions from its ceramic business in Russia and Mexico as well as acquisitions in Italy and Poland contributed to the upside.

Flooring North America: Net sales at this segment totaled $1.03 billion, up 2% year over year on strong price, mix and productivity improvement that offset the increased prices of raw materials and other inflation.

Flooring Rest of the World: Net sales increased 13% year over year to $523.3 million. On a constant days and currency basis, sales rose 8% on broader use of its patents and solid LVT product sales.

Q4 Guidance

Mohawk expects earnings per share in the range of $3.25-$3.34 for the fourth quarter.

The company expects the business to benefit from innovative new products, higher volume and synergies from recent acquisitions in the quarter. Mohawk expects to absorb more start-up costs, estimated at $15 million, in its quarterly results with the commencement of new operations. Meanwhile, the company expects to recover from the disruptions caused by hurricanes in the United States Overall, increased productivity, better product mix and price changes are likely to boost fourth-quarter results, partially offsetting reductions from expired patents.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates move upward during the past month. There have been two revisions higher for the current quarter compared to one lower.

VGM Scores

At this time, Mohawk's stock has a nice Growth Score of B, though it is lagging a bit on the momentum front with a C. Following the exact same course, the stock was allocated also 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 those looking for value and momentum.

Outlook

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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