Mohawk Industries, Inc.’s (MHK - Free Report) focus on introducing innovative products, increasing prices to offset inflation and improving productivity are encouraging.
The company enjoys a competitive edge over peers like Interface, Inc. (TILE - Free Report) , The Dixie Group, Inc. (DXYN - Free Report) and Crown Crafts, Inc. (CRWS - Free Report) , courtesy of its industry-leading designs, patented technologies and brands.
Strong on Acquisitions & Innovation
An opportunistic approach to acquisitions is an important part of Mohawk Industries’ growth strategy. These acquisitions have enhanced the company’s product portfolio and expanded its geographic footprint and market share. Since the beginning of 2017, the company has made four acquisitions. It has entered the European carpet tile and countertop market as well as the Russian sheet vinyl business. In April, Mohawk Industries completed the acquisition of two small ceramic manufacturers in Europe and a carpet nylon polymerization plant in the United States.
We are also encouraged by Mohawk Industries’ increased investments in product innovation, productivity and distribution. The company is introducing higher value products, adding service centers and unique merchandise in promotions to optimize each channel.
The company intends to invest more than $850 million in 2017 on product innovation, enhanced automation and driving synergies from the four acquisitions made so far this year.
Although July and August housing data has been weak, the overall fundamentals of the housing market are strong. A recovering economy, historically low interest/mortgage rates, rising rentals, rapidly increasing household formation and a limited supply of inventory point to strong demand.
As Mohawk Industries has heavy exposure to the U.S. residential sector, its revenues are expected to increase with improvement in consumer spending patterns and higher demand for flooring in both commercial and residential markets.
However, the impact of currency headwinds still remains significant. Mohawk Industries generates almost one-third of its revenues from customers outside the United States. Currency headwinds hurt sales in 2016 by $69 million. Notably, in the fourth quarter of 2017, Mohawk Industries will incur higher startup costs owing to increased production and marketing activities.
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