Mohawk Industries, Inc.’s (MHK Quick QuoteMHK - Free Report) prospects are gaining from the successful advancement of its strategic restructuring initiatives. This, alongside notable exposure in international markets and a stable balance sheet position, is an added tailwind.

However, the tailwinds mentioned above are being pressured to a great extent by headwinds in the form of elevated input costs and higher restructuring-associated costs, along with a softer residential market.

Shares of this global manufacturer of flooring products have tumbled 15.5% year to date while riding above the Zacks Textile - Home Furnishing industry but staying way below the broader Zacks Consumer Discretionary sector and the S&P 500 index. The detailed price performance is shown in the chart below.

Image Source: Zacks Investment Research

The Zacks Consensus Estimate of the company’s 2025 and 2026 earnings per share (EPS) has trended down in the past 30 days to $9.21 from $9.45 and $10.63 from $10.96, respectively. The estimated value for 2025 indicates a 5.1% year-over-year decline, while the same indicates growth of 15.4% for 2026. The company’s earnings surpassed expectations in each of the trailing four quarters, the average surprise being 5.1%.

Let us discuss the factors why investors must hold onto this Zacks Rank #3 (Hold) stock for now.

What’s Driving Mohawk’s Growth?

Accretive Restructuring Initiatives: Mohawk has been undertaking various strategic restructuring efforts to achieve productivity gains and improve its profitability. These initiatives include aligning ceramic production with demand in the United States, realigning its North American carpet operations, optimizing LVT manufacturing and ramping up new plants.

As of the start of 2025, Mohawk has been gaining well from the strategic initiatives already undertaken and the ones in progress. It highlighted the implementation of targeted pricing increases on its higher value products, mainly across its Flooring North America and Global Ceramic segments, to counter elevated input costs. Moreover, to lower its costs and elevate its competitive advantage in Mexico, Mohawk is currently focusing on certain restructuring projects, like expanding its porcelain offerings to grow its distribution and improve its mix in the Mexican market. It continues to focus on optimizing its sales and further lowering its operational costs with its restructuring initiatives, which are expected to benefit approximately $100 million in 2025.

International Exposure: Mohawk enjoys a strong international presence, with higher net sales being generated outside the United States. The company’s presence in Australia, Brazil, Canada, Europe, India, Malaysia, Mexico, New Zealand and Russia is encouraging. MHK is increasing utilization of new investments in the United States, Europe, Russia, Brazil and Mexico through more product offerings, expansion of customer base and an increase in production.

To expand sales in parts of Europe amid market uncertainties, the company recently highlighted focusing on stronger economies, introducing new products per regional preferences and leveraging global export opportunities. Furthermore, Mohawk also stated expanding its insulation sales into Eastern Europe to support a new facility in Poland. The facility is expected to be operational in 2027, when the market conditions turn out to be more favorable than today.

Stable Cash Position: Through the continuous strategic initiatives, the company is carefully improving its cash position and reducing its cost structure, driving profitability. As of March 29, 2025, Mohawk had cash and cash equivalents worth $702.5 million, up from $658.5 million as of March 30, 2024, and $666.6 million as of Dec. 31, 2024. The cash position is sufficient to meet its short-term obligations of $688 million.

MHK Trading at a Premium

Mohawk is currently trading at a premium compared with its industry peers on a forward 12-month price-to-earnings (P/E) ratio basis. The premium valuation indicates that the stock is trading above its industry peers, making it difficult for investors to figure out a suitable entry point.

Image Source: Zacks Investment Research

What’s Restricting MHK Stock’s Momentum?

Elevated Costs: Given the industry Mohawk operates in, the cost structure is subject to various factors beyond its control. Factors like geopolitical conflicts, labor shortages, natural disasters, pandemics, governmental regulations and other similar factors tend to affect the supply and prices of raw materials, labor, energy and fuel-related costs.

In the first quarter of 2025, Mohawk experienced margin compression due to higher input costs, elevated restructuring, acquisition and integration-related, and other costs and lower sales volume. As a reaction, the adjusted gross margin contracted 30 basis points (bps) to 24.1% year over year, with adjusted operating margin contracting 130 bps to 4.8%. Moreover, the adjusted selling, general and administrative (SG&A) expenses, as a percent of net sales, expanded 80 bps year over year to 19.2%. For the remainder of 2025, Mohawk expects to witness margin pressure from higher material costs, along with expenses associated with the ongoing restructuring initiatives.

Macro Uncertainty: During the first quarter of 2025, Mohawk witnessed a slowdown in the residential remodeling sector due to low housing turnover, elevated interest rates and weakening consumer confidence. The consumer confidence had been on the weaker side way before the announcement of the new tariff regime, which deepened the weakening.

Now, when the tariffs are under discussion globally, given Mohawk’s imports from Mexico (mainly ceramic tile and some of the LVT) at a 10% tariff rate, it expects the annual cost to sum up to approximately $50 million for 2025. Besides, given the ongoing market uncertainties, the housing demand softness is expected to continue in the near term.

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