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Wells Fargo Rates Mohawk Industries as ‘Market Perform’

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Price movement

Mohawk Industries (MHK) has a market cap of $14.8 billion. It fell 1.3% to close at $198.86 per share on September 29, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -3.8%, -6.1%, and 5.0%, respectively, on the same day. MHK is trading 4.2% below its 20-day moving average, 4.6% below its 50-day moving average, and 3.8% above its 200-day moving average.

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Related ETF and peers

The Vanguard Large-Cap ETF (VV) invests 0.06% of its holdings in Mohawk Industries. The ETF tracks a market-cap-weighted index that covers 85% of the market capitalization of the US equity market. The YTD price movement of VV was 6.9% on September 29.

The market caps of Mohawk Industries’ competitors are as follows:

  • Armstrong World Industries (AWI) — $2.3 billion
  • James Hardie Industries (JHX) — $7.0 billion
  • Berkshire Hathaway (BRK.A) — $353.1 billion

Mohawk Industries’ rating

Wells Fargo has initiated the coverage of Mohawk Industries with a “market perform” rating.

Performance of Mohawk Industries in fiscal 1Q16

Mohawk Industries reported fiscal 2Q16 net sales of $2.3 billion, a rise of 15.0% over the net sales of $2.0 billion in fiscal 2Q15. Sales from the Global Ceramic, Flooring North America, and Flooring Rest of the World segments rose 5.1%, 6.6%, and 50.7%, respectively, between fiscal 2Q15 and fiscal 2Q16. The company’s gross profit margin and operating income rose 8.6% and 37.1%, respectively.

Its net income and EPS (earnings per share) rose to $255.2 million and $3.42, respectively, in fiscal 2Q16, compared with $186.5 million and $2.53, respectively, in fiscal 2Q15. It reported adjusted EPS of $3.47 in fiscal 2Q16, a rise of 29.0% from fiscal 2Q15.

Mohawk’s cash and cash equivalents fell 34.5% and its inventories rose 4.3% between fiscal 2Q15 and fiscal 2Q16. Its current ratio and debt-to-equity ratio fell to 1.1x and 0.91x, respectively, in fiscal 2Q16, compared with 1.2x and 1.2x in fiscal 2Q15.

The company has projected EPS in the range of $3.40 to $3.49 per share, excluding any restructuring charges, for fiscal 3Q16. Next, we’ll take a look at Fortune Brands Home & Security (FBHS).

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