Bull of the Day: Mohawk Industries (MHK) - Bull of the Day
24 May 2013 - 9:00PM
Zacks
Mohawk Industries, Inc. (MHK) recently delivered a solid
first quarter earnings beat thanks to an improving U.S. housing
market and expanding profit margins.
Analysts revised their estimates significantly
higher for both 2013 and 2014 off the Q1 beat, sending the stock to
a Zacks Rank #1 (Strong Buy). Based on current consensus estimates,
analysts expect excellent growth from Mohawk over the next couple
of years. With valuation still at reasonable levels, shares of
Mohawk offers strong upside potential.
Mohawk Industries is a global flooring manufacturer
focused on the production of carpet, rugs, ceramic tile, laminate,
wood, stone and vinyl flooring. Its brands include American Olean,
Bigelow, Dal-Tile, Durkan, Karastan, Lees, Marazzi, Mohawk, Pergo,
Unilin and Quick-Step.
First Quarter Results
Mohawk Industries delivered solid first quarter
results on May 2. Adjusted earnings per share jumped 50% to 87
cents, beating the Zacks Consensus Estimate of 84 cents.
Net sales rose 6% to $1.487 billion, driven by
strong gains in the Dal-Tile and Unilin segments. The gross profit
margin did decline slightly from 25.5% to 25.4% of net sales.
However, the adjusted operating profit margin
expanded 140 basis points to 6.5% of net sales as the company
leveraged its selling, general and administrative expenses. This
led to a stellar 34% increase in adjusted operating income.
Estimates Soaring
Although Mohawk reported a relatively modest 3 cent
EPS beat for Q1, analysts revised their estimates significantly
higher for both 2013 and 2014. This sent the stock to a Zacks Rank
#1 (Strong Buy).
In fact, the 2013 Zacks Consensus Estimate has
jumped from $5.16 to $5.80 over the last 60 days. And the 2014
consensus has increased from $6.24 to $7.05 over the same period.
You can see these sharp increases in the company's 'Price &
Consensus' chart:
![](http://staticzacks.net/images/zacks/blogs/1369324100_scaled_425.jpg)
Analysts expect strong growth from Mohawk over the
next couple of years too. Based on current consensus estimates,
analysts project 53% EPS growth this year and 22% growth next
year.
The Zacks Industry Rank is also very bullish for
Mohawk. The 'Textile - Home Furnishings' industry is the #1 ranked
industry out of 265!
Valuation
Shares of Mohawk currently trade at 18x 12-month
forward earnings, which is above its 10-year median of 15x.
However, when you factor in the strong earnings growth projections
and excellent earnings momentum, this premium seems reasonable.
The Bottom Line
With strong industry tailwinds, rising estimates
and stellar earnings growth projections, Mohawk Industries offers
attractive upside potential.
Todd Bunton is the Growth & Income Stock
Strategist for Zacks Investment Research and Editor of the Income
Plus Investor service.
MOHAWK INDS INC (MHK): Free Stock Analysis Report
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