Back to top

Image: Bigstock

Mohawk (MHK) Shares Jump 10% on Q1 Earnings and Sales Beat

Read MoreHide Full Article

Mohawk Industries, Inc. (MHK - Free Report) reported impressive results for first-quarter 2022. Earnings and sales surpassed their respective Zacks Consensus Estimate and improved on a year-over-year basis. The uptrend was backed by record sales, higher pricing, growth in ceramic businesses, an improving commercial sector and benefits from small buyouts.

MHK’s shares leaped 10.1% in the after-hours trading session on Apr 28.

Pertaining to the market conditions, Jeffrey S. Lorberbaum, chairman and CEO of Mohawk, said, “Market conditions for flooring remain favorable, even as governments raise interest rates to combat inflation. Employment is at high levels and wages are increasing in most of our markets. Millions of millennials in their late 20s and early 30s are forming households and desire home ownership. Unlike past cycles, U.S. housing inventory is historically low, more single-family homes are under construction and the U.S. home deficit will require years to align supply with demand.”

Lorberbaum added, “Remodeling should remain strong with rising home equity and buyers of existing homes still completing long-term projects that they initiated over the past few years. Commercial new construction and remodeling continue to strengthen as business conditions improve and projects that were delayed due to the pandemic are initiated.”

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

Inside the Numbers

Mohawk reported adjusted earnings of $3.78 per share, surpassing the consensus mark of $2.89 by 30.8% and increasing 8.3% year over year. The upside was backed by record sales and favorable price, mix, and productivity.

Net sales of $3.02 billion topped the Zacks Consensus Estimate of $2.89 billion by 4% and increased 13% from the year-ago figure of $2.67 billion. On a constant-currency basis, net sales were up 17.3% year over year. The upside was driven by a robust residential new construction and remodeling environment. Commercial sales also improved from the prior year.

Operating Highlights

Adjusted gross profit of $803.1 million was up 0.1% year over year. Adjusted selling, general and administrative expenses of 15.9% — as a percentage of net sales — were down 180 basis points from the year-ago period. Adjusted operating income totaled $333.9 million, which grew 1.5% year over year.

Segment Details

Global Ceramic: Sales in the segment totaled $1.06 billion, up 14.5% year over year. Also, the metric improved 18.5% on constant-days and currency basis. Adjusted operating income increased to $103.3 million from $89.1 million a year ago. The segment’s operating margin was 9.4%. The upside was primarily due to productivity, pricing and mix improvements, partially offset by the inflation, and seasonality.

Flooring North America: Net sales at the segment amounted to $1.07 billion, increasing 10.6% year over year on a reported basis and 12.3% on a constant-days basis. The segment registered an adjusted operating income of $95.4 million for the reported quarter compared with $90.2 million reported in the prior-year period. Operating margin was 8.9% in the quarter. Favorable price, mix and productivity improvements were partially offset by inflation and seasonality.

Flooring Rest of the World: Net sales in the segment increased 14.2% year over year to $879 million. On a constant-currency basis, sales were up 22.1% from the year-ago level. Adjusted operating income was $144.7 million, down from $160.7 million reported a year ago. The segment’s operating margin was 15.3%. Pricing and mix improvements were offset by inflation, foreign exchange and supply-chain constraints.

Financial Highlights

As of Mar 31, 2022, Mohawk had cash and cash equivalents of $230.6 million compared with $268.9 million at 2021-end. Long-term debt — less current portion — at first-quarter end was $1.09 billion compared with $1.7 billion at December 2021-end.

MHK repurchased 2.1 million shares during the first quarter for a total of $307 million. Notably, in February 2022, the board approved an additional $500 million share repurchase program.

Second-Quarter 2022 View

MHK remains cautiously optimistic about industry growth this year despite inflation and interest rate pressures. Mohawk has initiated multiple-expansion projects, reduced spending and improved efficiencies to offset the inflationary environment. To adjust cost pressure, the company has been implementing price increases across its products and geographies.  Even though MHK has been pushing up prices, the historic rise in European energy costs continues to impact business.

Given the current situation, Mohawk expects second-quarter adjusted earnings to be $4.25-$4.35, excluding restructuring charges. Although the guidance indicates a decline from the year-ago figure of $4.45, it came above the Zacks Consensus Estimate of $3.40 per share for the quarter.

Zacks Rank

Mohawk currently carries a Zacks Rank #4 (Sell).

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

Some Better-Ranked Stocks in the Sector

Some better-ranked stocks in the Consumer Discretionary sector are Funko, Inc. (FNKO - Free Report) , Bluegreen Vacations Holding Corporation (BVH - Free Report) and Clarus Corporation (CLAR - Free Report) .

Funko sports a Zacks Rank #1 at present. FNKO has a trailing four-quarter earnings surprise of 96.2%, on average. Shares of the company have declined 22.5% in the past year.

The Zacks Consensus Estimate for Funko’s current financial year sales and EPS suggests growth of 22.6% and 26.8%, respectively, from the year-ago period’s reported levels.

Bluegreen Vacations sports a Zacks Rank #1 at present. BVH has a trailing four-quarter earnings surprise of 425.1%, on average. The stock has increased 46.2% in the past year.

The Zacks Consensus Estimate for BVH’s current financial year sales and EPS indicate growth of 8.3% and 20.8%, respectively, from the year-ago period’s levels.

Clarus sports a Zacks Rank #1 at present. The company has a trailing four-quarter earnings surprise of 12.3%, on average. Shares of the company have increased 15.7% in the past year.  

The Zacks Consensus Estimate for CLAR’s 2022 sales and EPS suggests growth of 25.3% and 23.1%, respectively, from the year-ago period’s levels.