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Mohawk (MHK) to Report Q3 Earnings: What's in the Offing?

Zacks.com logo Zacks.com 10/28/2020

Mohawk Industries, Inc. MHK is scheduled to report third-quarter 2020 results on Oct 29, after market close.

In the last reported quarter, the company’s adjusted earnings and net sales beat the Zacks Consensus Estimate by 562.5% and 7.9%, respectively. On a year-over-year basis, the metrics declined 87.2% and 20.7%, respectively, due to softness in retail demand, reduced production volume and unplanned shutdown costs.

Trend in Estimate Revision

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has increased to $2.31 per share from $2.14 over the past 30 days. The said figure indicates a 16% decrease from the year-ago earnings of $2.75 per share. Also, the consensus mark for revenues is $2.50 billion, suggesting a 0.7% year-over-year decline.

Mohawk Industries, Inc. Price and EPS Surprise

chart, line chart: Mohawk Industries, Inc. Price and EPS Surprise © Provided by Zacks.com Mohawk Industries, Inc. Price and EPS Surprise

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

Factors to Note

Although Mohawk was unable to provide guidance for the third quarter due to uncertainties associated with the COVID-19 outbreak, it expects a significant sequential improvement in quarterly results.

Residential remodeling and new construction channels recovered more than commercial, wherein businesses have been maintaining a cautious approach to investment.

Solid residential recovery is expected to have generated more demand for Mohawk’s products in the third quarter. Better-than-expected pricing and volumes in North American end markets are expected to have contributed to its top line. Additionally, Mohawk's ceramic tile business is likely to have gained from improved homebuilder activity and market share gains from new products (including Revo-Tile).

However, weakness in non-residential demand is expected to weigh on its results. Also, Mohawk has been witnessing a tough business environment, given soft demand, greater competition and reduced production volume. It took several initiatives to boost sales and reduce costs to combat the above-mentioned headwinds.

Lower volume, and unfavorable price and mix are expected to have impacted the company’s Global Ceramic unit. The consensus mark for revenues from the Global Ceramic unit is pegged at $885 million, implying a 3.5% year-over-year decrease.

The consensus estimate for the Flooring NA segment’s net sales is pegged at $949 million, indicating a decline of 5.3% from the year-ago figure.

The consensus mark for revenues from Flooring ROW is pegged at $611 million, suggesting a 1.7% increase from the year-ago quarter.

What the Zacks Model Unveils

Our proven model predicts 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.

Earnings ESP: Mohawk has an Earnings ESP of +6.33%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: It currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks With Favorable Combination

Here are some other stocks from the Zacks Consumer Discretionary space that investors may also consider, as our model shows that these too have the right combination of elements to deliver an earnings beat this time around.

Electronic Arts Inc. EA has an Earnings ESP of +517.63% and a Zacks Rank #3, at present.

Penn National Gaming, Inc. PENN has an Earnings ESP of +11.42% and a Zacks Rank of 3.

Under Armour, Inc. UAA has an Earnings ESP of +161.05% and a Zacks Rank #3.

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