Mohawk Industries (MHK) Will Be Positioned Well as Housing Recovers -Barron's

Mohawk Industries (NYSE: MHK) was highlighted in this weekend's edition of Barron's. The article describes reasons why shares of Mohawk have fallen from over $100 in July of last year, and also gives several reasons why the stock could be headed higher as the housing market strengthens.

A manufacturer of residential and commercial floor coverings such as carpet, laminate and tiling, Mohawk has certainly been affected by the downturn in the housing market in addition to rising energy and raw material costs.

On the other hand, according to the Barron's article, new-home construction only makes up about 20% of Mohawk's sales. This will lead to the company being well positioned as the housing market starts to come back and consumers are more likely to remodel their homes.

While Mohawk does not currently pay a dividend or buyback its common stock, the company is using cash to pay down debt and acquire businesses that will help it become more diversified. For example, last year, Mohawk purchased four wood-flooring plants from Columbia Forest Products in order to increase its presence in the hardwood floor market.

At the end of the first quarter, Mohawk had about $2.4 billion in debt, compared to $7.3 billion in total capital.

One investor cited in the article has a $120 price target on shares of Mohawk. Meryl Witmer, of Eagle Capital Partners, uses a "conservative" 12x multiple on $10 per share in after-tax free cash flow to arrive at this price target.

Mohawk Industries, Inc., together with its subsidiaries, engages in the production and sale of floor covering products for residential and commercial applications in the United States and Europe.

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