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Bank of America/Merrill Lynch Upgrades Mohawk Industries

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Oct. 18 2016, Published 10:40 a.m. ET

Price movement

Mohawk Industries (MHK) fell 0.66% and closed at $196.46 per share during the second week of October. The stock’s weekly, monthly, and YTD (year-to-date) price movements were -0.66%, -4.9%, and 3.7%, respectively, as of October 14. Mohawk Industries is trading 2.2% below its 20-day moving average, 5.0% below its 50-day moving average, and 2.4% 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. VV tracks a market cap–weighted index that covers 85% of the market capitalization of the US equity market. VV’s YTD price movement was 6.0% on October 14.

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

  • Armstrong World Industries (AWI) – $2.3 billion
  • James Hardie Industries (JHX) – $6.9 billion
  • Berkshire Hathaway (BRK.A) – $352.7 billion

Mohawk Industries’ rating

On October 12, 2016, Bank of America/Merrill Lynch upgraded Mohawk Industries’ rating to a “buy” from “neutral.”

Performance in fiscal 1Q16

Mohawk Industries reported fiscal 2Q16 net sales of $2.3 billion—a rise of 15.0% compared to 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 to $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 to 1.2x and 1.2x in fiscal 2Q15.

The company expects EPS of $3.40–$3.49 per share, excluding any restructuring charges, for fiscal 3Q16. Next, we’ll take a look at Polaris Industries (PII).

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