The world's biggest floorcovering company reported better-than-expected profits in the fourth quarter, although net income was still down 26 percent from a year ago.
Mohawk Industries Inc., said today its adjusted earning in the final three months of 2018 totaled $188 million, or $2.53 per shared, on sales of $2.45 billion. In the same period a year earlier, the Calhoun-based carpet and hard surfaces flooring maker had adjusted earnings of $256 million, or $3.42 per share, on sales of $2.37 billion.
The results were still 3 cents a share better than analysts forecasts for the fourth quarter, causing Mohawk's stock to jump by more than 7 percent in after-hours trading following the release of the quarterly results.
For all of 2018, Mohawk earned $862 million, or $11.47 per share, on sales of $10 billion. In 2017, Mohawk earned $972 million, or $12.98 per share, on sales of $9.5 billion.
"After five consecutive years of record earnings, 2018 proved more difficult than we anticipated with inflation increasing dramatically, luxury vinyl tile impacting other U.S. flooring products and most of our markets slowing," Mohawk CEO Jeff Lorberbaum said in his earnings announcement released after the markets closed today. "In this environment, we selectively invested approximately $1.5 billion to enhance our long-term performance, primarily in new product categories and geographies with green field projects and acquisitions, cost saving initiatives and buying back shares. We are managing through current conditions while enhancing the longer-term value of our business."
Last year, Mohawk acquired leading flooring companies in Australia, New Zealand and Brazil and in Europe acquired two flooring distributors and a specialized mezzanine company.
"Much of the benefit from these capital investments will be realized in 2020 and beyond as we achieve higher volume, mix and productivity," Lorberbaum said.
In 2018, Mohawk was hit by higher commodity prices and was unable to pass along all of those costs to consumers, causing more cost pressures and squeezing profits. Last fall, Lorberbaum said Mohawk cut manufacturing production to adapt to the slowing market demand.
"Economies have been slowing in most of our markets, oil volatility is making our costs unpredictable and housing markets in many regions are under pressure," Lorberbaum said. "Though our outlook is cautious because of these issues, we expect our results to improve through the year. In the first quarter, we are reducing production rates due to the softer environment we see in most of our markets. Higher priced materials will flow through before we realize the benefits from recent changes."
Mohawk shares have risen 9.6 percent so far in 2019, rising to a close of $128.20 per share. But Thursday's closing price was still 48.6 percent below Mohawk's stock price a year ago. Last year, Mohawk missed quarterly profit forecasts in two quarters, which helped to push down its stock price.
To help bolster its declining share price, Mohawk said it purchased about $274 million of its own stock in the fourth quarter, reducing the number of outstanding shares by about 3 percent, or 2.3 million shares.