Earnings estimates for
Mohawk Industries, Inc.
) have been trending higher along with the housing market. This
floor products provider posted robust third quarter results in
November, aided by product innovations, acquisitions and operating
With growing demand for new homes and a long-term expected earnings
growth rate of 20.0%, this Zacks #1 Rank (Strong Buy) offers an
attractive investment opportunity.
Solid Third Quarter Earnings
On November 1, Mohawk Industries reported third quarter adjusted
earnings of $1.04 per share, surpassing the Zacks Consensus
Estimate by 2% and last year's result by 25%. Improvements in
product mix, pricing, volume and productivity boosted earnings in
Net sales grew 2% year over year to $1.473 billion, but lagged the
Zacks Consensus Estimate of $1.478 billion. The gain stemmed from
product innovations, acquisitions and operating efficiencies.
Mohawk Industries has a strong financial position and therefore
looks for geographic expansion. With the acquisition announcement
of Pergo at the end of October, the company expects to capture the
most recognized brand of premium laminate flooring in the U.S. and
Europe. The company has also announced its plans to acquire the
Marazzi Group, which will make Mohawk the worldwide leader in
The company expects fourth quarter adjusted earnings between 89
cents and 98 cents per share, up from last year's 72 cents. The
demand for new homes and improved sales of existing homes in the
U.S. provide a positive outlook for future growth. Moreover, the
company is focusing on pricing to combat raw material inflation.
Unanimous Agreement Among Analysts
Over the past 60 days, all 9 earnings estimates for 2012 were
revised upwards, lifting the Zacks Consensus Estimate by 1.1% to
$3.71 per share. This indicates year-over-year growth of 26.9%. The
Zacks Consensus Estimate for 2013 increased 7.2% to $4.94 per share
as all 10 estimates moved upward over the same time frame. This
reflects a year-over-year increase of 33.4%.
Mohawk Industries currently trades at a price-to-book (P/B)
multiple of 1.79, reflecting a 14.0% premium to the peer group
average of 1.57. The P/S multiple for the stock is 1.12, which is
at a premium of 31.8% to the peer group average of 0.85. However,
given its strong fundamentals, the premium valuation looks
Shares of Mohawk Industries have been rising since mid-December
2012 and reached a 52-week high of $94.15 on January 3, 2013.
Moreover, the stock is currently trading above its 50- and 200-day
moving averages, which stand at $84.98 and $74.25, respectively. In
fact, the stock has been consistently trading above its 50-day and
200-day moving averages since late-December 2012. Volume averages
roughly 677K daily.
Mohawk Industries, Inc. is engaged in the production and sale of
floor covering products for residential and commercial markets for
remodeling and new construction primarily in the United States and
Europe. The company provides a complete selection for all markets
of carpet, ceramic tile, laminate, wood, stone, vinyl and rugs. The
company's premium brands include Mohawk, Karastan, Lees, Bigelow,
Durkan, Daltile, American Olean, Unilin and others. The market cap
of the company is $6.43 billion.
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