Mohawk Q3 Earnings Beat, Stock Declines on Low Sales & Tepid Q4 View

Mohawk Industries, Inc. MHK reported strong third-quarter 2024 results (ended Sept. 30). Its earnings surpassed the Zacks Consensus Estimate and improved from the prior year despite pricing pressures and a negative mix.Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.On the other hand, net sales declined on a year-over-year basis but marginally beat the consensus mark. Mohawk noted that market conditions were slower than anticipated across the regions due to high interest rates, lingering inflation and lower consumer confidence. Commercial channel has also lost some momentum yet outperformed residential.MHK’s stock plunged 9.6% in the after-hours trading session on Thursday. As global conflicts, political uncertainty and inflation are weighing on consumer confidence and discretionary spending around the world, MHK does not see an industry improvement this year. It also expects recent U.S. hurricanes to negatively impact its fourth-quarter sales by $25-$40 million.Nonetheless, it expects recent interest rate cuts in the United States, Europe and Latin America will strengthen housing markets and increase flooring sales next year.Inside the NumbersMohawk reported adjusted earnings per share (EPS) of $2.90, which marginally topped the consensus mark of $2.89. The metric increased from $2.72, reflecting a rise of 6.6% year over year, backed by the positive impact of the sales initiatives, productivity and restructuring actions and lower input costs, partially offset by pricing and mix pressure.Mohawk Industries, Inc. Price, Consensus and EPS Surprise Mohawk Industries, Inc. price-consensus-eps-surprise-chart | Mohawk Industries, Inc. QuoteNet sales of $2.72 billion topped the consensus estimate of $2.71 billion by 0.5% but decreased 1.7% from the year-ago figure of $2.77 billion. On a legacy and constant currency and days basis, net sales were down 2.1% year over year.Adjusted gross margin was up 40 basis points (bps) year over year to 26.2%. Adjusted selling, general and administrative expenses, as a percent of net sales, declined 80 bps to 17.3% from the year-ago period. Our model expected gross margin to grow 60 bps and SG&A to increase by 20 bps.Adjusted operating margins expanded 40 bps to 8.8% from a year ago.Segment DetailsGlobal Ceramic: Sales in the segment totaled $1.06 billion, down 3.1% year over year and 2.2% on a legacy and constant currency and days basis. We expected segment sales to decline 2.2% year over year. Adjusted net sales were $1.07 billion in the reported quarter. Yet, adjusted operating income increased to $90.8 million from $87.6 million a year ago. The segment’s adjusted operating margin also rose to 8.6% from 8% a year ago due to increased productivity and lower material and energy costs, which offset labor and freight inflation.Flooring North America: Net sales in the segment amounted to $974 million, up 1.2% year over year compared with our expectations of a decline of 2.2%. The segment registered an adjusted operating profit of $88.9 million, up from $77.6 million reported in the prior-year period. Adjusted operating margin was 9.1% compared with 8.1% a year ago.Flooring Rest of the World: Net sales in the segment decreased 3.5% year over year to $687 million, higher than our projections of a decline of 3%. On a constant currency basis, sales were down 6.3% from the year-ago level. Adjusted net sales were $746.4 million in the reported quarter. Adjusted operating income was $71.8 million, down from $77.3 million reported a year ago. The segment’s adjusted operating margin was 10.5%, down from 10.9% year over year.Financial HighlightsAs of Sept. 28, 2024, it had cash and cash equivalents of $424 million compared with $518.5 million on Sept. 30, 2023. The long-term debt, less the current portion, was $1.72 billion at third-quarter 2024-end compared with $1.68 billion at the end of third-quarter 2023.In the reported quarter, net cash from operating activities was $319.6 million compared with $512 million a year ago. The company generated a free cash flow of $204.2 million in the third quarter compared with  $384.6 million a year ago.Q4 ViewMHK expects adjusted EPS in the range of $1.77-$1.87, excluding restructuring and other charges, compared with the year-ago figure of $1.96.MHK’s Zacks Rank & Recent Consumer Discretionary ReleasesMohawk currently carries a Zacks Rank #3 (Hold).Boyd Gaming Corporation BYD reported third-quarter 2024 results, with earnings and revenues surpassing the Zacks Consensus Estimate. The company’s top and bottom lines increased year over year.During the quarter, the company highlighted the positive impact of its investments in the Downtown Las Vegas and Midwest & South segments. It also reported robust performances in its Online and Managed businesses, reinforcing the strength of its diversified business model.Vail Resorts, Inc. MTN reported mixed fourth-quarter fiscal 2024 results, with earnings missing the Zacks Consensus Estimate and revenues beating the same. Revenues declined on a year-over-year basis and the adjusted loss widened from the prior-year quarter’s levels.During the quarter, its reported EBITDA declined year over year due to the underperformance of the Australian winter business.Hilton Worldwide Holdings Inc. HLT reported third-quarter 2024 results, with earnings and revenues beating the Zacks Consensus Estimate. Both the metrics increased on a year-over-year basis.The company's performance was backed by notable improvements in revenue per available room, attributed to higher occupancy rates and average daily rates.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.7% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Boyd Gaming Corporation (BYD): Free Stock Analysis Report Mohawk Industries, Inc. (MHK): Free Stock Analysis Report Hilton Worldwide Holdings Inc. (HLT): Free Stock Analysis Report Vail Resorts, Inc. 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