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Mohawk's (MHK) Q4 Earnings to Gain From Buyouts & Innovation

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Mohawk Industries, Inc. (MHK - Free Report) is set to report fourth-quarter 2017 results on Feb 8. Last quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 0.3%. Moreover, Mohawk surpassed expectations in all of the last four quarters, the average being 1.2%.

The company is likely to benefit from its strategy of driving growth through acquisitions in the to-be-reported quarter.  Since the beginning of 2017, the company has made four acquisitions. These have enhanced the company’s product portfolio and expanded its geographic footprint and market share.

Mohawk’s fourth-quarter results are expected to gain from the introduction of innovative products. The company has been launching higher value products, adding service centers and unique merchandise in promotions to optimize each channel. The company’s capital expenditure rose to around $900 million in the first nine months of 2017.

Coming to the segments, per the Zacks Consensus Estimate, sales at the Global Ceramic segment, contributing 36.5% to third-quarter sales, are expected to increase 13.1% year over year on introduction of porcelain collections and aggressive sales strategies. Flooring North America segment, contributing 42.1% to third-quarter sales, will likely see a 5.3% revenue growth. Flooring Rest of the World segment sales are anticipated to improve 10.4% on a year-over-year basis. The Zacks Consensus Estimate for total revenues is pegged at $2.38 billion, up 9.1% from the year-ago quarter.

The company expects increased productivity, better product mix and price changes to boost fourth-quarter results, partially offsetting reductions from expired patents.

However, increased raw material costs, start-up expenses and currency headwinds continue to raise concerns.  Mohawk expects to absorb more start-up costs, estimated at $15 million, in its fourth-quarter results with the commencement of new operations.

Taking all these factors into consideration, the company expects fourth-quarter EPS in the range of $3.25-$3.34, compared with $3.26 reported in the prior-year quarter. The Zacks Consensus Estimate for earnings stands at $3.33, reflecting an increase of 2.2% year over year.

What Does the Zacks Model Say?

Our proven model does not conclusively show a beat for Mohawk this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Mohawk has a Zacks Rank #3 and an Earnings ESP of -0.37%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement.

Mohawk Industries, Inc. Price and EPS Surprise

Stocks to Consider

Here are some companies in the broader Consumer Discretionary you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Carnival (CCL - Free Report) has an Earnings ESP of +3.17% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Michael Kors (KORS - Free Report) has an Earnings ESP of +1.61% and a Zacks Rank #3.

Nike (NKE - Free Report) has an Earnings ESP of +2.48% and a Zacks Rank #3.

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