Can Mohawk Industries (MHK) Pull A Surprise In Q1 Earnings?
Zacks Investment Research | Apr 25, 2017 10:40PM ET
Mohawk Industries, Inc. (NYSE:MHK) is set to report first-quarter 2017 results on Apr 27.
Last quarter, the company posted a positive earnings surprise of 1.2%. Meanwhile, it reported positive earnings surprises in all of the past four quarters, the average being 1.96%.
Let’s see how things are shaping up for this announcement.
Factors to Consider
We are encouraged by Mohawk Industries’ increased internal investments to boost capacity and enter new markets. In 2016, the company’s capital investments were the highest at approximately $670 million, which is expected to increase to $750 million in 2017.
Moreover, Mohawk Industries is well poised to gain traction on the current positive housing scenario, as it has heavy exposure to the U.S. residential sector. Steady job and wage growth, a recovering economy, affordable interest/mortgage rates, rapidly increasing household formation and a limited supply of inventory hint at strong demand in 2017.
In order to achieve long-term growth, the company is expanding its differentiated product line, introducing distinctive collections, aggressively implementing productivity improvements across all businesses and bringing new capacity online to support growth. It is currently exploring numerous investment options to drive expansion, including green field opportunities and acquisitions. Such initiatives can be expected to contribute in the to-be-reported quarter.
Taking these factors into account, the earnings per share guidance for the first quarter is projected at $2.64 to $2.73, which represents an 11% to 15% increase over the first-quarter 2016 figure.
However, we are apprehensive about the persistent pressure from adverse foreign currency movement, since Mohawk Industries generates almost one-third of its revenues from customers outside the U.S.
Notably, for the first quarter, the Zacks Consensus Estimate for earnings is pegged at $2.71, reflecting a 13.8% year-over-year increase. Meanwhile, our estimate for revenues is $2.26 billion, implying a 4.1% increase.
Earnings Whispers
Our proven model does not conclusively show that Mohawk Industries will beat estimates this quarter. That is because a stock needs to have both a positive Zacks Investment Research
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