Mohawk Industries (MHK) Q2 Earnings Beat, Revenues Miss

Mohawk Industries, Inc.’s (NYSE:MHK) adjusted earnings of $3.47 per share beat the Zacks Consensus Estimate of $3.36 by 3.27%. Earnings also came above the guidance of $3.29 to $3.38. Adjusted earnings exclude restructuring, acquisition and other charges. Earnings increased 29% year over year backed by strong operating margins.

Revenues Rise Y/Y, Margins Strong

Total revenue of $2.31 billion missed the Zacks Consensus Estimate of $2.35 billion by 1.58%.

Revenues however increased 13.2% year over year driven by higher sales across all the segments, especially Flooring Rest of the World. Net sales increased 12.1% year over year on a constant days and currency exchange rate basis.

Adjusted gross profit of $758.4 million increased 19.7% year over year. Adjusted selling, general and administrative (SG&A) expenses were up 14.4% to $401.7 million.

Adjusted operating income on a constant exchange rate increased 27.8% to $361.1 million. Adjusted operating margin grew 160 basis points (bps) to 15.4%, mainly because of improved productivity, gains from acquisition, higher volumes and lower input costs across all the segments.

Segment Details

Last year, the leading flooring manufacturer realigned its reportable segments, organizing its carpet, wood, laminate and the newly acquired vinyl operations by geography into Flooring North America (NA) and Flooring Rest of the World (ROW) segments. The Global Ceramic segment remained unchanged with the acquisition of KAI in Eastern Europe.

Global Ceramic: The Global Ceramic segment includes ceramic tile, porcelain tile and natural stone operations.

Net sales in this segment amounted to $829.8 million, up 5% year over year. Sales were up 4% on a constant days and constant currency basis. The North American ceramic business gained traction during the quarter, owing to increased sales personnel and distribution points.

Flooring Rest of the World: Flooring ROW segment includes laminate, hardwood flooring, roofing elements, insulation boards, medium-density fiberboard (MDF), chipboards, and vinyl flooring products, including LVT. The new segment combines the European and Rest of the World operations of the former Laminate and Wood segment and the European and Rest of the World operations of the vinyl flooring businesses acquired recently.

Net sales of this segment were $499.8 million, up 51% year over year. Sales improved 5% on a constant days and constant currency basis driven largely by acquisitions. Sales were also driven by strong performance of premium laminate and LVT.

Flooring North America: The Flooring NA segment includes North American operations of various product categories, including carpets, rugs, carpet pad, hardwood, laminate and vinyl products, including LVT. The new segment combines the former Carpet segment, the North American operations of the former Laminate and Wood segment, and the North American operations of the newly acquired vinyl flooring businesses.

Net sales in this segment increased 7% year over year to $980.7 million. On a constant days and constant currency basis, sales improved 1%. The company continues to focus on premium residential carpet with new innovative products.

MOHAWK INDS INC Price, Consensus and EPS Surprise

MOHAWK INDS INC Price, Consensus and EPS Surprise | MOHAWK INDS INC Quote

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

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Investors interested in the wider consumer discretionary sector may also consider The Dixie Group, Inc. (NASDAQ:DXYN) , Interface Inc. (NASDAQ:TILE) , and Pool Corp. (NASDAQ:POOL) . While Dixie Group sports a Zacks Rank #1 (Strong Buy), Interface and Pool Corp. hold a Zacks Rank #2 (Buy).