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Why Mohawk Industries (MHK) Might be Well Poised for a Surge

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Mohawk Industries (MHK - Free Report) could be a solid addition to your portfolio given a notable revision in the company's earnings estimates. While the stock has been gaining lately, the trend might continue since its earnings outlook is still improving.

The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this flooring maker, should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- is principally built on this insight.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

Consensus earnings estimates for the next quarter and full year have moved considerably higher for Mohawk Industries, as there has been strong agreement among the covering analysts in raising estimates.

The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 Month EPS

Current-Quarter Estimate Revisions

For the current quarter, the company is expected to earn $2.80 per share, which is a change of +68.67% from the year-ago reported number.

Over the last 30 days, the Zacks Consensus Estimate for Mohawk Industries has increased 28.4% because five estimates have moved higher compared to no negative revisions.

Current-Year Estimate Revisions

For the full year, the company is expected to earn $11.96 per share, representing a year-over-year change of +35.45%.

The revisions trend for the current year also appears quite promising for Mohawk Industries, with seven estimates moving higher over the past month compared to no negative revisions. The consensus estimate has also received a boost over this time frame, increasing 15.21%.

Favorable Zacks Rank

Thanks to promising estimate revisions, Mohawk Industries currently carries a Zacks Rank #2 (Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

Investors have been betting on Mohawk Industries because of its solid estimate revisions, as evident from the stock's 17.7% gain over the past four weeks. As its earnings growth prospects might push the stock higher, you may consider adding it to your portfolio right away.


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