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Mohawk's (MHK) Shares Jump on Q4 Earnings and Revenue Beat

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Mohawk Industries, Inc. (MHK - Free Report) reported solid fourth-quarter 2020 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate. Shares of this leading global manufacturer of flooring products gained 2.7% in the after-hours trading session on Feb 11.

Mohawk reported adjusted earnings of $3.54 per share, beating the consensus mark of $2.88 by 22.9%. The metric also improved 57.3% year over year.

Net sales of $2.64 billion surpassed the consensus estimate of $2.5 billion by 5.6% and grew 9% from the year-ago figure. On a constant-currency and days basis, net sales were up 5.5% year over year. Markedly, the quarterly sales figure is the highest in the company’s history. Although commercial activity remained weak, thereby impacting sales and margins, all markets served by Mohawk witnessed solid residential purchases, with laminate, LVT and sheet vinyl outperforming other flooring categories.

Mohawk Industries, Inc. Price, Consensus and EPS Surprise

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 $760.9 million grew 13.9% year over year. Adjusted selling, general and administrative expenses decreased 1.6% from the prior-year level. Adjusted operating income totaled $305.1 million, which improved 49% year over year.

Segment Details

Global Ceramic: Sales in the segment totaled $919.7 million, up 7% year over year. Also, the metric improved 6% on a constant currency and days basis. Adjusted operating income increased to $87.8 million from $53.3 million a year ago owing to improved productivity, higher volume and lower shutdown cost, partially offset by unfavorable price and mix.

Flooring North America: Net sales at the segment came in at $963.7 million, up 3% year over year. The metric was flat on a constant days basis. Moreover, the segment registered adjusted operating income of $91.1 million for the quarter, up 27% from a year ago. Improvement in productivity, increased volume, and reduction in inflation were offset by unfavorable price and mix.

Flooring Rest of the World: Net sales in the segment increased 20% year over year to $758.7 million. On a constant-currency basis, sales were up 13% from the year-ago level. Adjusted operating income was $138 million, up 56.7% from a year ago. The upside was attributed to strengthening volume and productivity, as well as favorable material costs.

2020 Highlights

Adjusted earnings came in at $8.83 per share, up 12.1% from $10.04 a year ago. Net sales were $9.6 billion, down 4.2% from a year ago. Sales were down 3.9% on a constant currency and days basis.

Financial Highlights

As of Dec 31, 2020, cash and cash equivalents were $768.6 million compared with $134.8 million at 2019-end. Long-term debt, less current portion, at the end of 2020 was $2.36 billion versus $1.52 billion at 2019-end.

For the fourth quarter, the company generated free cash flow of $247.7 million, down from $300.8 million a year ago. For 2020, free cash flow was $1.34 billion, up from $873.3 million in 2019.

First-Quarter 2021 View

It expects continued government subsidies and low interest rates to support economic growth, new home construction, as well as residential remodeling. Meanwhile, Mohawk has been experiencing increased inflation in most of the product categories. Hence, the company has been raising prices in response. Given the current situation, it expects first-quarter adjusted EPS within $2.69-$2.79, excluding restructuring charges.

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 #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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