Shares of Mohawk Industries jumped nearly 11% Friday after the company reported better than expected sales and profits and the company reaffirmed it will buy back up to $500 million of its stock.
The world's biggest floor covering maker said demand for carpets and hardwood floors has returned to more normal levels and even grown in some sectors above what Mohawk has been able to produce, reducing inventories in the most recent fiscal quarter by about $80 million. Despite the slowdown in commercial flooring sales in 2020, Mohawk CEO Jeff Lorberbaum said those sales are now returning and residential sales are up as more people are staying at home and focused upon their residential floors.
"Under continued pandemic conditions, people all over the world are spending more time in their homes and working remotely," Mohawk CEO Jeff Lorberbaum said. "Globally, this trend increased investments in home remodeling as well as driving new home purchases.
On a per-share basis, the Calhoun, Georgia-based company said it had net income of $2.87. Earnings, adjusted for one-time gains and costs, came to $3.26 per share.
The results exceeded Wall Street expectations. The average estimate of eight analysts surveyed by Zacks Investment Research was for earnings of $2.31 per share.
The flooring maker posted revenue of $2.57 billion in the period, which also beat Street forecasts. Six analysts surveyed by Zacks expected $2.5 billion.
Mohawk said its margins have also improved due to costs reduction measures the company has implemented around the world.
"Mohawk's recent restructuring addressed multiple aspects of the business and will allow the company to achieve future cost savings," said Michael A. Gayed, CFA, a SA Contributor who has given Mohawk a bullish rating.
Mohawk also announced that it will be raising some prices to cover higher shipping and other expenses.
"Our increase in manufacturing in the period was limited by challenges with hiring, training and capacity," Lorberbaum said. "To cover higher operating, material and logistics costs, we have announced selective price increases in some markets and product categories.
Lorberbaum said residential remodeling and new construction are expected to improve next year and commercial business should improve from the depressed levels of 2020 as economies recover.
"Our strong balance sheet, cash generation and liquidity will allow us to move from a defensive posture to a more aggressive growth strategy," he said.
The results helped boost Mohawk shares by $10.14 per share, or 10.9%, to close at $103.19 per share in trading on the New York Stock Exchange. Mohawk Industries shares have decreased 32% since the beginning of the year, while the Standard & Poor's 500 index has increased 2.5%.
Despite Friday's gain, Mohawk directors still think the stock is undervalued and recently authorized a stock repurchase program.
"We believe our stock represents an attractive investment and our Board of Directors recently approved the plan to repurchase $500 million of the company's stock," Lorberbaum said.
- Compiled by Dave Flessner