Results: Mohawk Industries, Inc. Beat Earnings Expectations And Analysts Now Have New Forecasts
It's been a good week for Mohawk Industries, Inc. (NYSE:MHK) shareholders, because the company has just released its latest annual results, and the shares gained 8.6% to US$138. Revenues were US$10.0b, approximately in line with expectations, although statutory earnings per share (EPS) performed substantially better. EPS of US$10.30 were also better than expected, beating analyst predictions by 19%. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Check out our latest analysis for Mohawk Industries
Following last week's earnings report, Mohawk Industries's ten analysts are forecasting 2020 revenues to be US$10.0b, approximately in line with the last 12 months. Statutory earnings per share are expected to dip 3.5% to US$9.98 in the same period. In the lead-up to this report, analysts had been modelling revenues of US$10.1b and earnings per share (EPS) of US$10.46 in 2020. Analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share forecasts for next year.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$153, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Mohawk Industries analyst has a price target of US$205 per share, while the most pessimistic values it at US$110. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
In addition, we can look to Mohawk Industries's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. We would highlight that Mohawk Industries's revenue growth is expected to slow, with forecast 0.5% increase next year well below the historical 5.7%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 5.6% next year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect Mohawk Industries to grow slower than the wider market.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Mohawk Industries's revenues are expected to perform worse than the wider market. The consensus price target held steady at US$153, with the latest estimates not enough to have an impact on analysts' estimated valuations.
With that in mind, we wouldn't be too quick to come to a conclusion on Mohawk Industries. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Mohawk Industries going out to 2024, and you can see them free on our platform here..
You can also view our analysis of Mohawk Industries's balance sheet, and whether we think Mohawk Industries is carrying too much debt, for free on our platform here.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.