Mohawk Industries (MHK) Misses Q3 EPS by 29c, Revenues Miss; Announces New Share Buyback Up to $500M
Mohawk Industries (NYSE: MHK) reported Q3 EPS of $3.29, $0.29 worse than the analyst estimate of $3.58. Revenue for the quarter came in at $2.5 billion versus the consensus estimate of $2.6 billion.
Commenting on Mohawk Industries' third quarter performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated, "Our third quarter results fell short of our expectations. Sales growth in all segments was lower than our estimates, price increases had less impact and we experienced more inflation than predicted. Transportation costs continued to rise due to the limited availability of common carriers and higher fuel prices. Additional manufacturing reductions were required during the period to control our inventory levels. Our LVT sales were up significantly but were still constrained by internal production. Our margins were further impacted by a decline in product mix from customers trading down, import competition due to the strengthening U.S. dollar and higher volumes in channels that use lower value products. Most of our markets have experienced weakening demand, inflation and pricing pressures. In the period, the acquisition of Godfrey Hirst added revenues of approximately $70 million, even as the Australian market slowed due to higher mortgage rates, lending restrictions and reduced exports to China. For the period, start-up costs related to new capital projects were $20 million, in line with our plan.
"In the U.S., we continue to execute additional pricing actions across most product categories to offset ongoing inflationary pressures. Our LVT sales are expanding from greater internal production and sourcing programs. We announced price increases on products that we import from China to pass through the new tariffs and other inflation. We are increasing our internal trucking to enhance service to our customers and control costs. In our regions outside the U.S., most are experiencing softer demand and increased inflation and currency pressure. We are increasing prices as conditions permit, introducing innovative products, expanding our distribution and reducing costs.
We have many investments in new products and geographies in various stages of completion that have a combined sales potential of $1.2 billion, which should contribute margins similar to our existing businesses when optimized. The projects already starting up are rigid LVT and premium laminate in the U.S., ceramic tile in Mexico, and rigid LVT, carpet tile, porcelain slabs, technical tile and premium laminate in Europe. Other projects under construction include quartz countertops in the U.S., porcelain tile in Poland, and sheet vinyl and premium laminate in Russia.
We are confident about Mohawk\'s position in the global market, and our Board of Directors has approved a new plan to repurchase $500 million of our company's stock. While we continue to see opportunities for investments and M&A, we believe our shares represent an attractive opportunity."
BUYBACK
Stock repurchase authorizationMohawk's board of directors has approved a share repurchase program pursuant to which the company may repurchase up to $500 million of its common stock. Our new share repurchase program demonstrates the board and management's confidence in Mohawk's operating model and potential for cash flow generation. This new program provides us with another lever in our balanced approach to create value for our shareholders.
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