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Mohawk (MHK) to Report Tepid Earnings in Q3 on Soft Demand

Mohawk Industries, Inc. MHK is scheduled to report third-quarter 2022 results on Oct 27, after market close.

In the last reported quarter, the company’s adjusted earnings topped the Zacks Consensus Estimate by 1.4% but declined 0.9% year over year. Net sales lagged the consensus estimate by 1.4% but increased 6.7% from the year-ago quarter.

MHK’s earnings surpassed expectations in all the trailing four quarters, with the average being 8.5%.

Trend in Estimate Revision

The Zacks Consensus Estimate for Mohawk’s third-quarter earnings is pegged at $3.34 per share, indicating a 15.4% decline from the prior-year reported figure of $3.95. The consensus estimate for net sales is pegged at $3.06 billion, suggesting an 8.6% increase from the year-ago reported figure of $2.82 billion.

Mohawk Industries, Inc. Price and EPS Surprise

 

Mohawk Industries, Inc. Price and EPS Surprise
Mohawk Industries, Inc. Price and EPS Surprise

Mohawk Industries, Inc. price-eps-surprise | Mohawk Industries, Inc. Quote

 

Factors to Note

Mohawk’s sales in third-quarter 2022 are expected to have slowed down owing 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.

In Europe, dramatically variable natural gas prices and constrained supply are reducing economic growth. Mohawk has been witnessing inflation in most product categories. Also, the availability of material, labor and transportation has been challenging, thereby inflating costs. Especially, tight chemical supplies are hurting the output of LVT, carpet, laminate and board panels. These inflationary pressures are likely to weigh on third-quarter bottom-line results.

MHK expects third-quarter adjusted earnings (excluding restructuring charges) in the range of $3.33-$3.43 per share.

The consensus mark for revenues from the Global Ceramic unit is pegged at $1,089 million, implying a 9.1% year-over-year increase. The consensus estimate for the Flooring NA segment’s net sales is pegged at $1,140 million, indicating an increase of 8.6% from the year-ago reported figure. The consensus mark for revenues from Flooring ROW is pegged at $816 million, suggesting a 6.3% improvement from the year-ago quarter.

The consensus mark for Global Ceramic, Flooring NA and Flooring ROW businesses’ adjusted operating income suggests a decline of 10.9%, 10% and 27.1%, respectively, from a year ago period.

That said, Mohawk has undertaken certain actions across the enterprise to reduce costs. In Flooring NA, it has rationalized some older, less efficient fiber assets and reduced rug manufacturing capacity. In Flooring ROW, it is consolidating insulation products and streamlining organization. In Ceramic Europe, it 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, this is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Currently, it has a Zacks Rank #4 (Sell) and an Earnings ESP of 0.00%.

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

Stocks to Consider

Here are some stocks from the Zacks Consumer Discretionary sector that investors may consider as our model shows that these have the right combination of elements to post an earnings beat for the to-be-reported quarter:

RCI Hospitality Holdings, Inc. RICK has an Earnings ESP of +4.15% and a Zacks Rank #1.

Shares of RCI Hospitality have increased 13.2% in the past year. RICK’s earnings surpassed the consensus mark thrice in the trailing four quarters and missed once, the average surprise being 39.4%.

JAKKS Pacific, Inc. JAKK has an Earnings ESP of +3.25% and a Zacks Rank #3.

Shares of JAKKS Pacific have increased 62.3% in the past year. JAKK’s earnings surpassed the consensus mark in all of the trailing four quarters, the average surprise being 155%.

Cedar Fair, L.P. FUN has an Earnings ESP of +2.38% and a Zacks Rank #3.

Shares of Cedar Fair have declined 15.8% in the past year. FUN’s earnings surpassed the consensus mark thrice in the trailing four quarters and missed once, the average surprise being 5.3%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.


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