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Mohawk (MHK) Q1 Earnings & Revenues Beat Estimates, Stock Up

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Mohawk Industries, Inc. MHK reported solid first-quarter 2021 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate. Notably, both the top and bottom lines beat the consensus mark for the fourth straight quarter. Shares of this leading global manufacturer of flooring products gained 2.8% in the after-hours trading session on Apr 29.

Mohawk reported adjusted earnings of $3.49 per share, beating the consensus mark of $2.80 by 24.6%. The metric also improved 110.2% year over year.

Net sales of $2.67 billion outpaced the consensus estimate of $2.6 billion by 2.6% and increased 16.8% from the year-ago figure. On a constant-currency and days basis, net sales were up 9.1% year over year. Markedly, the quarterly sales figure is the highest in the company’s history. Investment in new projects continues to drive commercial business sequentially. The company witnessed solid residential purchases, with laminate and LVT outperforming other flooring categories.

Operating Highlights

Adjusted gross profit of $802.3 million grew 27.8% year over year. Adjusted selling, general and administrative expenses rose 2% from the prior-year level. Adjusted operating income totaled $329 million, which improved 101.9% year over year.

Mohawk Industries, Inc. Price, Consensus and EPS Surprise

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

Segment Details

Global Ceramic: Sales in the segment totaled $929.9 million, up 9.6% year over year. Also, the metric improved 5.4% on a constant currency basis. Adjusted operating income increased to $89.1 million from $47.9 million. Moreover, the segment’s operating margin expanded 370 basis points to 9.4% owing to favorable price and mix, increase in volumes and rise in productivity. The gain was marginally offset by inflation.

Flooring North America: Net sales at the segment amounted to $969.3 million, up 14.3% year over year. The metric was up 9% on a constant currency basis. Moreover, the segment registered adjusted operating income of $90.2 million for the quarter, compared with $44.3 million in the prior-year quarter. Improvement in productivity and increased volume were negated by inflation.

Flooring Rest of the World: Net sales in the segment increased 30.7% year over year to $769.9 million. On a constant-currency basis, sales were up 14.6% from the year-ago level. Adjusted operating income was $160.7 million, up 101.4% from a year ago. The segment’s operating margin expanded 780 basis points to 20.7%. The upside can be attributed to strengthening volume and productivity, favorable price and product mix, and beneficial exchange rate.

Financial Highlights

As of Apr 3, 2021, cash and cash equivalents were $557.3 million compared with $263.1 million as of Mar 28, 2020. Long-term debt, less current portion, at the end of first quarter was $1.7 billion compared with $1.5 billion at Mar 28, 2020.

For the first quarter, the company generated free cash flow of $144.9 million, up from $79.3 million a year ago.

Second-Quarter 2021 View

The company announced that it anticipates to gain from low interest rates, government actions and lesser pandemic restrictions. It will ramp up manufacturing to increase volumes. Mohawk has been experiencing increased inflation in most of the product categories. Hence, the company has been raising prices in response. Given the current situation, it expects second-quarter adjusted EPS to be $3.57-$3.67, excluding restructuring charges. The Zacks Consensus Estimate for second quarter earnings is pegged at $3.13.

Zacks Rank

Mohawk — which shares space with Culp, Inc. CULP, Interface, Inc. TILE and Select Interior Concepts, Inc. SIC in the Zacks Textile - Home Furnishing industry — currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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