Mohawk (MHK) Q1 Earnings Beat, Margins Rise, Q2 View Strong

Mohawk Industries, Inc. MHK reported impressive earnings in first-quarter 2024 (ended Mar 30). Its earnings surpassed the Zacks Consensus Estimate and improved from the prior year on the back of lower input costs, less restructuring expenses and productivity gains.

Shares of this leading global flooring manufacturer inched up 0.2% in the after-hours trading session on Apr 25.

On the other hand, net sales declined on a year-over-year basis but marginally beat the consensus mark.

Despite the positive effect of actions taken to enhance its performance, economic headwinds are impacting industry sales, margins and mix. Amid persistent market conditions, significant pricing and mix pressure due to industry competition for volume hurt the performance. Mohawk also noted that residential remodeling remained soft due to low housing sales and the impact of inflation on discretionary spending.

Inside the Numbers

Mohawk reported adjusted earnings per share (EPS) of $1.86, which topped the consensus mark of $1.70 by 9.4%. The metric increased from $1.75 per share, reflecting a rise of 6.3% year over year, backed by restructuring, productivity initiatives and benefits from lower cost raw materials and energy, partially offset by weaker pricing and mix.

Mohawk Industries, Inc. Price, Consensus and EPS Surprise

Mohawk Industries, Inc. Price, Consensus and EPS Surprise

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

Net sales of $2.68 billion topped the consensus estimate of $2.67 billion by 0.4% but decreased 4.5% from the year-ago figure of $2.81 billion. On a legacy and constant currency and days basis, net sales were down 5.5% year over year.

Adjusted gross margin was up 30 basis points (bps) year over year to 24.4%. Adjusted selling, general and administrative expenses, as a percent of net sales, rose 10 bps to 18.4% from the year-ago period. Adjusted operating margins also expanded 30 bps to 6.1% from 5.8% a year ago.

Segment Details

Global Ceramic: Sales in the segment totaled $1.04 billion, down 1.4% year over year and 5% on a legacy and constant currency and days basis. Adjusted net sales were $1.006 billion in the reported quarter. Adjusted operating income decreased to $52.7 million from $66.9 million a year ago. The segment’s adjusted operating margin declined to 5% from 6.3% a year ago.

Flooring North America: Net sales at the segment amounted to $900.2 million, down 5.6% year over year on a reported basis and 12.2% on a legacy basis. The segment registered an adjusted operating profit of $47.8 million, significantly up from $5 million reported in the prior-year period. Adjusted operating margin was 5.3% compared with 0.5% a year ago.

Flooring Rest of the World: Net sales in the segment decreased 7.4% year over year to $734.4 million. On a constant currency basis, sales were down 5.9% from the year-ago level. Adjusted net sales were $746.4 million in the reported quarter. Adjusted operating income was $74 million, down from $100.1 million reported a year ago. The segment’s adjusted operating margin was 10.1%, down from 12.6% year over year.

Financial Highlights

As of Mar 30, 2024, it had cash and cash equivalents of $658.5 million compared with $572.9 million on Apr 1, 2023. The long-term debt, less the current portion, was $1.69 billion compared with $2.27 billion at the end of first-quarter 2023.

At the end of the first quarter, the company generated a free cash flow of $96.9 million versus $128.8 million a year ago.

Q2 View

MHK expects adjusted EPS in the range of $2.68-$2.78, excluding restructuring and other charges, compared with the year-ago figure of $2.76.

Due to European vacation schedules, the company anticipates second-quarter sales to be seasonally higher than the third quarter.

Zacks Rank & Recent Consumer Discretionary Releases

Mohawk currently carries a Zacks Rank #4 (Sell).

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

Las Vegas Sands Corp. LVS reported impressive first-quarter 2024 results, with earnings and revenues beating the Zacks Consensus Estimate and increasing on a year-over-year basis.

The quarterly results reflected solid growth in Macao and Singapore. The company witnessed ongoing recovery in travel and progress in tourism spending. Singapore’s Marina Bay Sands demonstrated a record financial and operational performance. The introduction of new suite options and improved services positions the company well for enhanced airlift capacity and continuous recovery in travel and tourism spending, especially from China and the broader region.

Mattel, Inc. MAT reported first-quarter 2024 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. The top line missed the consensus estimate for the second straight quarter.

The company experienced robust bottom-line performance, largely propelled by increased margins and the repurchase of $100 million worth of shares during the quarter, and remained aligned with its annual targets. It anticipates ongoing advantages from the Optimizing for Profitable Growth initiative, aiming for $60 million in cost reductions in 2024 and a cumulative $200 million by 2026.

Hilton Worldwide Holdings Inc. HLT reported solid first-quarter 2024 results, with earnings and revenues beating the Zacks Consensus Estimate and rising year over year.

The company's performance was backed by notable improvements in revenue per available room (RevPAR), attributed to higher occupancy rates and average daily rates (ADR). It also benefited from its fee-based business model and robust development initiatives. Hilton maintained its momentum in signings, starts, and openings, reflecting a solid pipeline. Based on the growth trajectory observed thus far, the company is optimistic about sustaining the momentum in the near future.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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