Mohawk's (MHK) Q1 Earnings Likely to Decline: Factors to Note
Mohawk Industries, Inc. MHK is scheduled to report first-quarter 2023 results on Apr 27, after market close.
In the last reported quarter, the company’s adjusted earnings topped the Zacks Consensus Estimate by 2.3% but declined 55.3% year over year. Net sales lagged the consensus estimate by 2.6% and decreased 4% from the year-ago quarter.
MHK’s earnings surpassed expectations in 10 of the trailing 11 quarters.
Trend in Estimate Revision
The Zacks Consensus Estimate for Mohawk’s first-quarter earnings is pegged at $1.29 per share, indicating a 65.9% decline from the prior-year reported figure of $3.78. The consensus estimate for net sales is pegged at $2.72 billion, suggesting a 9.8% decrease from the year-ago reported figure of $3.02 billion.
Mohawk Industries, Inc. Price and EPS Surprise
Mohawk Industries, Inc. price-eps-surprise | Mohawk Industries, Inc. Quote
Factors to Note
Mohawk’s top and bottom lines are expected to have declined in first-quarter 2023, thanks to softness in the housing industry and remodeling activities. Higher interest rates and inflationary pressure have been moderating demand for homes, impacting consumer discretionary spending. Also, residential remodeling is softening as consumers have been deferring their home improvement projects.
Mohawk has been witnessing inflation in most product categories. Also, the availability of materials, labor and transportation has been challenging, thereby inflating costs. Inventory costs remained elevated in most products due to higher material and energy costs in early 2022. Also, it planned not to raise production in the first quarter, thereby increasing unabsorbed costs. Mohawk expects more pressure on pricing and mix due to low industry volumes, which are likely to significantly weigh on the quarterly results.
MHK expects first-quarter adjusted earnings (excluding restructuring charges) in the range of $1.24-$1.34 per share. We expect the same to decrease 65.9% year over year to $1.29 per share.
We expect Global Ceramic revenues to fall 9.2%. Flooring NA revenues are likely to decline 11.9% and Flooring ROW is expected to be down 17.9% year over year.
The consensus mark for revenues from the Global Ceramic unit is pegged at $1,008 million, implying a year-over-year decrease from $1,065 million. The consensus estimate for the Flooring NA segment’s net sales is pegged at $968 million, indicating a decline from the year-ago reported figure of $1,072 million. The consensus mark for revenues from Flooring ROW is pegged at $739 million, suggesting a decrease from $879 million reported in the year-ago quarter.
Our expectation for adjusted operating income for the Global Ceramic, Flooring NA and Flooring ROW businesses suggests a decline of 26.5%, 90.9% and 66.8%, respectively, from the year-ago period.
That said, Mohawk has undertaken certain actions across the enterprise to reduce costs. Flooring NA has rationalized some older, less efficient fiber assets and reduced rug manufacturing capacity. Flooring ROW is consolidating insulation products and streamlining organization. Ceramic Europe is simplifying the administrative and manufacturing organizations. These actions are likely to have benefited the company in the to-be-reported quarter.
What the Zacks Model Unveils
Our proven model does not conclusively predict an earnings beat for Mohawk this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. Unfortunately, that is not the case here, as you will see below.
Currently, MHK has an Earnings ESP of -7.75% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks to Consider
Here are some stocks from the Zacks Consumer Discretionary sector that investors may consider as our model shows that they have the right combination of elements to post an earnings beat for the to-be-reported quarter:
Wynn Resorts, Limited WYNN has an Earnings ESP of +111.38% and a Zacks Rank #2.
WYNN’s earnings beat the estimates in two of the trailing four quarters and missed twice, the average surprise being 0.6%.
Hyatt Hotels Corporation H has an Earnings ESP of +56.57% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
H’s earnings beat estimates in each of the trailing four quarters, the average surprise being 1,380.7%.
Choice Hotels International, Inc. CHH has an Earnings ESP of +7.21% and a Zacks Rank #3.
CHH’s earnings surpassed the consensus mark twice in the trailing four quarters and missed twice, the average surprise being 3.5%.
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Hyatt Hotels Corporation (H) : Free Stock Analysis Report
Wynn Resorts, Limited (WYNN) : Free Stock Analysis Report
Choice Hotels International, Inc. (CHH) : Free Stock Analysis Report
Mohawk Industries, Inc. (MHK) : Free Stock Analysis Report
