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Will Hurricanes Dent Mohawk's (MHK) Q3 Earnings Performance?

Mohawk Industries, Inc. MHK is set to report third-quarter 2017 results on Oct 26.

The company’s third-quarter performance is likely to be affected by the recent hurricanes, which have resulted in considerable demand and supply disruption.

Also, increased raw material costs, start-up expenses and currency headwinds continue to raise concerns. On the brighter side, Mohawk implemented price increases across most product categories and regions to make up for higher material costs and currency changes in the third quarter.

The company is likely to benefit from its strategy of driving growth through acquisitions. These acquisitions broaden Mohawk’s product portfolio and expand its geographic footprint and market share. Since the beginning of 2017, the company has executed four buyouts.

We are also encouraged by Mohawk’s increased investments in product innovation, productivity and distribution. The company is introducing higher value products, adding service centers and unique merchandise in promotions to optimize each channel. The company intends to spend more than $850 million in 2017 on product innovation, enhanced automation and driving synergies from the four acquisitions made so far this year.

Coming to the segments, as per the Zacks Consensus Estimate, sales at the Global Ceramic segment are expected to increase 1.9% sequentially and 11.9% year over year on the back of the recent acquisitions. Flooring North America segment sales will likely increase 3.5% sequentially and 6.5% year over year. However, Flooring Rest of the World segment sales are anticipated to decrease 6.3% sequentially but improve 3% on a year-over-year basis. Overall, the Zacks Consensus Estimate for revenues is pegged at $2.46 billion, up 6.4% from the year-ago quarter.

The solid improvement in the top line, driven by increased revenues from all segments, is expected to boost earnings. The Zacks Consensus Estimate for third-quarter earnings stands at $3.74, reflecting an increase of 6.7% year over year. The EPS guidance provided by the company for the quarter is pegged at the $3.70 to $3.79 range, reflecting an increase of 5.7% to 8.3%.

 What Does the Zacks Model Say?

Our proven model does not conclusively show a beat for Mohawk this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Mohawk carries a Zacks Rank #4 (Sell) and has an Earnings ESP of -0.27%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement.

Mohawk Industries, Inc. Price and EPS Surprise

 

 

Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Pinnacle Foods Inc. PF has an Earnings ESP of +2.03% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Carter's, Inc. CRI has an Earnings ESP of +1.33% and a Zacks Rank #3.

The Estée Lauder Companies Inc. EL has an Earnings ESP of +0.34% and a Zacks Rank #2.

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Estee Lauder Companies, Inc. (The) (EL): Free Stock Analysis Report
 
Pinnacle Foods, Inc. (PF): Free Stock Analysis Report
 
Carter's, Inc. (CRI): Free Stock Analysis Report
 
Mohawk Industries, Inc. (MHK): Free Stock Analysis Report
 
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