Will Product Innovation Drive Mohawk's (MHK) Q1 Earnings?
Mohawk Industries, Inc. MHK is set to report first-quarter 2018 results on Apr 26. In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 2.7%. Moreover, Mohawk surpassed expectations in all of the last four quarters, the average being 1.6%.
Introduction of innovative products across its portfolio is expected to improve segment and boost overall sales, which will be reflected in the upcoming quarterly results. The company has been launching higher value products, adding service centers and unique merchandise. The company’s capital expenditure rose to around $900 million in 2017.
The company intends to invest additional $750 million in 2018. Mohawk is expected to benefit in the to-be-reported quarter from the expansion of LVT in the United States and Europe; ceramic capacity increases in the United States, Mexico, Italy, Poland, Bulgaria and Russia; luxury laminate in the United States, Europe and Russia; carpet tile in Europe; sheet vinyl in Russia; countertops in the United States and Europe; and carpet and rugs in the United States.
This apart, the company is likely to benefit from its strategy of driving growth through acquisitions, which will be evident in the to-be-reported quarter. Since the beginning of 2017, the company has made four acquisitions. The buyouts have enhanced the company’s product portfolio and expanded geographic footprint and market share. While these acquisitions have contributed to the company’s top line, Mohawk is also undertaking initiatives to improve the performance of the acquired companies. Such measures include the implementation of new strategies and transformation of organizational structures.
However, increased raw material costs as well as start-up expenses behind new products and production continue to raise concerns.
Taking all these factors into consideration, the company expects first-quarter EPS in the range of $2.93-$3.02 compared with $2.72 reported in the prior-year quarter. Also, earnings will benefit from a stronger euro and reduced global tax rate. The Zacks Consensus Estimate for earnings is pegged at $3.01, reflecting an increase of 10.7% year over year. The consensus estimate for revenues is pegged at $2.41 billion, reflecting an increase of 8.7% year over year.
What Does the Zacks Model Say?
Our proven model shows that Mohawk is likely to beat estimates this quarter. This is because a stock needs to have 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 +0.21%. 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
Mohawk Industries, Inc. Price and EPS Surprise | Mohawk Industries, Inc. Quote
Other Stocks to Consider
Here are some companies in the broader Consumer Discretionary space you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:
Carnival CCL has an Earnings ESP of +1.47% and a Zacks Rank #3.
Planet Fitness, Inc. PLNT has an Earnings ESP of +1.12% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Nike NKE has an Earnings ESP of +7.75% and a Zacks Rank #3.
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