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Mohawk (MHK) to Report Q1 Earnings: High Inflation to Ail

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Mohawk Industries, Inc. (MHK - Free Report) is slated to report first-quarter 2022 results on Apr 28, after market close.

In the last reported quarter, the company’s adjusted earnings and net sales topped the Zacks Consensus Estimate by 1.7% and 0.9%, respectively. The metrics increased 16.7% and 4.5% year over year, respectively.

Markedly, MHK’s earnings surpassed expectations in all the trailing four quarters, with the average being 11.6%.

Trend in Estimate Revision

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has decreased to $2.92 per share from $2.93 over the past 30 days. Nonetheless, the estimated figure indicates 16.3% growth from the year-ago earnings of $3.49 per share. The consensus mark for revenues is $2.91 billion, suggesting a 9.1% year-over-year improvement.

Mohawk Industries, Inc. Price and EPS Surprise

Mohawk Industries, Inc. Price and EPS Surprise

Mohawk Industries, Inc. price-eps-surprise | Mohawk Industries, Inc. Quote

Factors to Note

MHK is expected to have registered improved sales during first-quarter 2022 owing to robust demand trends. New home construction and improvement of the commercial space are likely to have benefited its performance in the to-be-reported quarter.

Owing to higher market demand and increased sales in residential remodeling and new construction markets, Mohawk's U.S. ceramic business has been witnessing improved customer traffic. The company expects the expansion of ceramic capacities in the first quarter and beyond. The consensus mark for revenues from the Global Ceramic unit is pegged at $994 million, implying a 6.9% year-over-year increase.

The Flooring NA business has also been seeing strong growth in the residential channel. Its commercial channel has been recovering and seeing more investments in new projects. The consensus estimate for the Flooring NA segment’s net sales is pegged at $1,060 million, indicating an improvement of 9.4% from the year-ago reported figure.

Within Flooring ROW, MHK has been witnessing strong demand in most categories and geographies. Especially, the insulation business has been experiencing strong demand backed by government incentives for energy savings. The consensus mark for revenues from Flooring ROW is pegged at $876 million, suggesting a 13.8% improvement from the year-ago quarter.

Meanwhile, Mohawk has been witnessing inflation in most of the product categories and hence raising prices. Also, the availability of materials, labor and transportation has been challenging, thereby inflating costs. Especially, tight chemical supplies have been hurting the output of LVT, carpet, laminate and board panels. These inflationary pressures are likely to weigh on first-quarter bottom-line results.

During fourth-quarter 2021 earnings discussion, management noted that European natural gas prices remained most volatile, substantially increasing energy and material costs. Therefore, European businesses are temporarily challenged. For first-quarter 2022, record-high natural gas prices are likely to increase net costs by $40-$45 million in the European ceramic business.

The consensus mark for adjusted operating income from Global Ceramic is $54 million, indicating a 39.3% decrease from $89 million reported a year ago. The same for Flooring NA units is pegged at $80 million, suggesting a decline of 11.1% from $90 million in the prior year. The consensus estimate for Flooring ROW business’ adjusted operating income is $137 million, which suggests a fall of 14.9% from $161 million a year ago.

Given the current situation, Mohawk expects first-quarter adjusted earnings to be $2.90-$3.00, excluding restructuring charges, indicating a decline from the year-ago figure of $3.49.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Mohawk this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. Unfortunately, this is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Currently, it has a Zacks Rank #4 (Sell) and an Earnings ESP of -5.35%.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks to Consider

Here are some stocks from the Zacks Consumer Discretionary sector that investors may consider as our model shows that these have the right combination of elements to post an earnings beat for the to-be-reported quarter:

Bright Horizons Family Solutions Inc. (BFAM - Free Report) has an Earnings ESP of +1.82% and a Zacks Rank #3.

In the trailing four quarters, BFAM’s earnings topped the consensus mark in all the trailing four quarters, with the average being 53.7%.

The Aaron's Company, Inc. (AAN - Free Report) has an Earnings ESP of +7.99% and a Zacks Rank #3.

Over the trailing four quarters, AAN’s earnings topped the consensus mark in all the trailing four quarters, with the average being 76.1%.

Callaway Golf Company (ELY - Free Report) has an Earnings ESP of +4.35% and a Zacks Rank #3.

In the last four quarters, ELY’s earnings topped the consensus mark in all the trailing four quarters, with the average being 1,047.2%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.