Mohawk Industries, Inc. (NYSE: MHK) has reported the adjusted earnings per share of $3.42 in the fourth quarter of FY 17 , while adjusted revenue growth of 8.5 percent to $2.37 billion in the fourth quarter of FY 17, missing the analysts’ estimates for revenue of $2.38 billion. Therefore the stock lost over 4.8% on Feb 9th, 2018 (as of 12:50PM EST; Source: Google finance).
The operating income grew 13% to $343 million while absorbing start-up costs of approximately $10 million and the decline of income from patents. Further, during 2017, the company has completed four acquisitions to broaden the product offering and improve our cost structure. These include bolt-on ceramic businesses in Italy and Poland, a U.S. talc mine for ceramic and a nylon polymerization plant to further integrate our carpet manufacturing.
For the first quarter of FY 18 ending in April, MHK expects its earnings-per-share to be in the range from $2.93 to $3.02. Analysts surveyed by Zacks had projected the adjusted earnings per share of $3.30. In the first quarter, the company expects all segments to improve sales and the introduction of innovative products across the company’s portfolio. In Flooring North America, the timing of the carpet price increase moved some sales into the prior quarter. MHK ongoing operating results, excluding the expired patents and start-up investments, is expected to substantially improve in the first quarter. MHK’s earnings will benefit from the past acquisitions and a stronger Euro, as well as our 2018 global tax rate which will decline to approximately 21% due to tax reform.
Furthermore, the acquisition of Godfrey Hirst will be completed later in 2018 after normal closing conditions are concluded. The company expects the opportunities to enhance their product innovation and marketing strategies, lower their costs by supplying raw materials and increase their sales of hard surface products. Godfrey Hirst should be accretive to earnings per share by $0.35 to $0.40 in the first twelve months.
During 2018, the company will invest an additional $750 million in the existing businesses to complete projects that were begun in 2017 and to start new initiatives. The company’s largest investments during this two-year period are the expansion of LVT in the U.S. and Europe, ceramic capacity increases in the U.S., Mexico, Italy, Poland, Bulgaria and Russia, luxury laminate in the U.S., Europe and Russia; carpet tile in Europe, sheet vinyl in Russia, countertops in the U.S. and Europe, and carpet and rugs in the U.S.