Credit: Shutterstock photoShares of Mohawk Industries Inc.MHK hit a 52-week high of $207.79 on Aug 14, 2015. In fact, the company's share price has increased 5% since it posted decent second quarter 2015 results on Aug 6. Despite currency headwinds, the company provided encouraging earnings guidance for 2015.
Modest Q2 Results
Mohawk's adjusted earnings of $2.69 per share beat the Zacks Consensus Estimate of $2.61 by 3.1%. Also, earnings of this leading flooring manufacturer came above management's expectation and increased 22% year over year as strong operating margin made up for a relatively softer top line.
Currency headwinds had a negative impact on revenues. While revenues of $2.04 billion missed the consensus mark, it remained flat year over year. However, net sales, on a constant exchange rate, increased 7% year over year driven by higher sales in the Flooring North America segment.
Adjusted gross profit grew 260 basis points (bps) year over year due to lower cost of sales. Adjusted operating income increased 31.7% while operating margin grew 240 bps to 13.8%, mainly on improved productivity initiatives and lower costs across all segments.
Q3 Guidance Encouraging
Mohawk expects the U.S. economy to continue to improve, strengthening both the residential and commercial flooring markets. Therefore, sales and margins are expected to improve year over year in the third quarter in the U.S. Also, the company expects improved performance in Mexico and most regions of Europe in the third quarter.
Given the scenario, the company expects adjusted earnings per share in the range of $2.91 to $2.99, up from the year-ago figure of $2.44, despite currency related headwinds.
Mohawk Industries carries a Zacks Rank #2 (Buy).
Other Stocks to Consider
Some other stocks worth considering in the textile-home furnishing industry are Interface Inc. TILE and Culp, Inc. CFI , both sporting a Zacks Rank #1 (Strong Buy). In the broader construction sector, one can consider Lennar Corporation LEN , also sporting a Zacks Rank #1.
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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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
