Yahoo Finance Mohawk (MHK) Q1 Earnings & Net Sales Beat Estimates, Stock Up
Mohawk Industries, Inc. MHK reported impressive results for first-quarter 2023, wherein its top and bottom lines surpassed the Zacks Consensus Estimate. However, earnings and net sales declined on a year-over-year basis.
Nonetheless, the company exceeded its estimates for adjusted earnings of $1.24-$1.34 per share. Shares of this leading global flooring manufacturer jumped 6.09% in the after-hours trading session on Apr 27.
Jeffrey S. Lorberbaum, chairman and CEO of Mohawk, said, “We exceeded our earnings expectations with the business maintaining higher pricing and stronger mix and Flooring Rest of the World outperforming the other segments. The commercial channel continued to be stronger than residential with home remodeling projects being postponed and new housing construction being impacted by higher mortgage rates.”
Inside the Numbers
Mohawk reported adjusted earnings of $1.75 per share, which topped the consensus mark of $1.28 by 36.7%. The metric plunged from $3.78 per share, reflecting a year-over-year fall of 53.7%. The decline was due to intense inflation, higher interest rates and lower volume.
Mohawk Industries, Inc. Price, Consensus and EPS Surprise
Mohawk Industries, Inc. price-consensus-eps-surprise-chart | Mohawk Industries, Inc. Quote
Net sales of $2.806 billion topped the consensus estimate of $2.719 billion by 3.2% but decreased 6.9% from the year-ago figure of $3.016 billion. On a constant-currency basis, net sales were down 5.9% year over year. Adjusted net sales were $2.836 billion in the reported quarter.
Operating Highlights
The adjusted gross margin was down 250 basis points (bps) year over year to 24.1%. Adjusted selling, general and administrative expenses, as a percent of net sales, increased 240 bps to 18.3% from the year-ago period. Adjusted operating margins also contracted to 5.8% from 10.7% a year ago.
Segmental Details
Global Ceramic: Sales in the segment totaled $1,059.3 million, down 0.5% year over year and 1.2% on a constant-currency basis. Adjusted net sales were $1,052 million in the reported quarter. Adjusted operating income decreased to $66.9 million from $100.3 million a year ago. The segment’s adjusted operating margin was down 310 bps to 6.3%. Favorable pricing and product mix, and productivity gains were offset by inflation, lower volumes and temporary shutdowns.
Flooring North America: Net sales at the segment amounted to $953.4 million, down 11.1% year over year on a reported basis. The segment registered an adjusted operating profit of $5 million, down from $95.4 million in the prior-year period. The adjusted operating margin was 0.5% compared with 8.9% a year ago. Favorable pricing and product mix, along with productivity gains, were offset by inflation, reduced volumes, temporary shutdowns and incremental marketing investments.
Flooring Rest of the World: Net sales in the segment decreased 9.7% year over year to $793.5 million. On a constant currency and day basis, sales were down 5.5% from the year-ago level. Adjusted net sales were $830.6 million in the reported quarter. Adjusted operating income was $100.1 million, down from $136.5 million reported a year ago. The segment’s adjusted operating margin was 12.6%, down 290 bps year over year. Pricing and mix improvements were offset by inflation, lower volumes, and temporary plant shutdowns.
Financial Highlights
As of Mar 31, 2023, it had cash and cash equivalents of $572.9 million compared with $230.6 million at March 2022-end. The long-term debt — less current portion — was $2.265 billion compared with $1.09 billion at the end of March 2022.
For the first quarter, the company generated a free cash flow of $128.8 million versus a negative cash flow of $74.5 million a year ago.
2Q23 View
Pertaining to the second quarter, Jeffrey stated, “We are proactively managing our spending and cost structures to optimize our results. We anticipate that industry volume and pricing will remain under pressure across our markets. We expect seasonal improvement in demand along with reduced energy and material costs to improve our future results.”
Mohawk expects adjusted earnings of $2.56-$2.66 per share, excluding restructuring, acquisition and other charges. This indicates a significant decline from the year-ago figure of $4.41. The consensus estimate for second-quarter adjusted earnings is pegged at $2.80 per share, whereas we project $2.55.
Zacks Rank & Recent Consumer Discretionary Releases
Mohawk currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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