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Mohawk (MHK) to Buy Ceramic Tile Business Vitromex for $293M

Zacks Equity Research
·4-min read

Mohawk Industries, Inc. MHK inked a deal with Grupo Industrial Saltillo (GIS) to buy its ceramic tile business, Vitromex, for approximately $293 million in cash. The transaction is expected to close in the second half of 2022 and is subject to the approval of GIS’s shareholders and customary government approvals and closing conditions.

In this connection, Mohawk’s chairman and CEO, Jeffrey S. Lorberbaum, stated, “In the past decade, we have significantly increased our participation in the Mexican ceramic tile market, including developing a world-class organization and constructing a state-of-the-art facility in Salamanca. Ceramic tile is the primary flooring utilized in Mexico, and the market has grown approximately eleven percent in pesos per year over the past five years. Combined with Vitromex, we will offer our customers a complete array of residential and commercial products at all price points with enhanced service capabilities.”

Founded in 1967, Vitromex has four manufacturing facilities in Mexico. The company built a leading position in the $1.7-billion (2.9 billion square feet) Mexican ceramic tile market with a broad distribution network and a product offering, including glazed ceramic, porcelain, mosaics and decorative tiles. It generated revenues of approximately $204 million last year. Post completion, the buyout will enhance MHK’s customer base, manufacturing efficiencies and logistical capabilities.

Acquisition Strategy Bode Well

From 1992 to 2021, MHK has completed 48 acquisitions. These acquisitions broaden Mohawk’s product portfolio and expand its geographic footprint and market share. The company’s recent bolt-on acquisitions in Europe have enhanced its growing insulation and panels businesses. Sales of products remain strong and the design and features MHK brings to the market give it competitive advantages at all price points.

The company aims to increase its footprint in various ceramic tile market in the future. This apart, Mohawk has undertaken various strategic initiatives to improve profitability and combat inflationary pressure and labor shortages.

Mohawk’s shares have outperformed the Zacks Textile - Home Furnishing industry so far this year. Earnings estimates have also moved up to $15.52 per share from $13.93 in the past 60 days. This reflects 4.4% year-over-year growth in 2022.

This Zacks Rank #3 (Hold) company has been experiencing rising raw inflation, primarily in material, energy and transportation. Increasing product development costs and labor shortages are adding to the woes.

MHK remains cautiously optimistic about industry growth this year despite inflation and interest rate pressures and has initiated multiple expansion projects, reduced spending and improved efficiencies to offset the woes.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some Top-Ranked Stocks From the Zacks Construction Sector

Louisiana-Pacific Corporation LPX is a leading manufacturer of sustainable, quality engineered wood building materials, structural framing products and exterior siding for use in residential, industrial and light commercial construction. It operates through four segments: Siding, Oriented Strand Board, Engineered Wood Products and South America.

Louisiana-Pacific is a Zacks Rank #2 (Buy) stock. The company’s earnings estimates for 2022 have increased to $14.87 per share from $13.02 in the past 30 days.

Jacksonville, FL-based Rayonier Inc. RYN is a leading pure-play timberland REIT. With a solid portfolio of timberlands in some of the most productive timber-growing regions of the Southern United States, Pacific Northwest and New Zealand, RYN is well-positioned to capitalize on the robust domestic demand trends. This will help the company improve the export market conditions and create a favorable pricing environment. RYN is also focused on adding high-quality timberlands to its portfolio through acquisitions.

The consensus estimate for this Zacks Rank #2 player’s 2022 earnings has witnessed an upward revision of 1.6% in the past 30 days.

Boise, ID-based Boise Cascade Company BCC — which makes wood products and distributes building materials in the United States and Canada — is aided by factors like favorable commodity wood products, pricing and robust construction activity.

Boise Cascade currently carries a Zacks Rank #2. Earnings estimates for 2022 have moved north to $18.43 per share from $15.07 over the past 30 days.


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