Home Improvement Stocks' Q3 Earnings On Oct 26: LEG & MHK

The Consumer Discretionary sector, which covers major home furnishing companies, is likely to see a 1.7% drop in earnings this quarter compared to 4.7% growth last quarter. Revenues are expected to rise 2.9%, lower than last quarter’s 8.8%.

This sector, which is ranked among the bottom 38% (10 out of 16) of all Zacks sectors, has been facing challenges like volatile commodity prices, changing consumer spending patterns and adverse currency fluctuations. Nevertheless, rising consumer confidence on the back of a steady housing sector is a major positive.

Notably, home furnishing companies like Home Depot Inc (NYSE:HD) , Lowe’s Companies, Inc. (NYSE:LOW) and Lumber Liquidators Holdings Inc’s (NYSE:LL) have seen a rally in their shares post the hurricane mayhem. As home owners have faced damaged properties, rebuilding efforts have ramped up. This in turn has driven demand for home-improvement equipment and materials.

However, the hurricanes might adversely affect results of such companies in the third quarter owing to disruptions in demand and supply chains. Nevertheless, increased demand of home improvement products will largely benefit these companies.

All said, let’s see what awaits the following stocks that are queued up for third-quarter 2017 earnings release on Oct 26.

Leggett & Platt, Incorporated (NYSE:LEG) is exposed to substantial volatility in raw material prices, with steel being one of the company’s key raw materials and the market for the same being cyclical in nature. Incidentally, the company’s bottom line has declined year over year for three straight quarters now, owing to inflation in raw material price. In the last quarter, earnings and EBIT fell 3% and 7.4% year over year, respectively, due to higher steel price.

The current Zacks Consensus Estimate for the quarter under review is pegged at 62 cents, which represents an 8.1% decline from the year-ago figure. Earnings estimates have been stable over the last 30 days. Further, analysts polled by Zacks expect revenues of $1,010 million, up 6.5% from the year-ago quarter.

Leggett & Platt, Incorporated Price and EPS Surprise

Leggett & Platt, Incorporated Price and EPS Surprise | Leggett & Platt, Incorporated Quote

Our proven model does not conclusively show an earnings beat for Leggett this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Leggett has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 62 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The company currently carries a Zacks Rank #4 (Sell). Note that we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into an earnings announcement.

(Read more: Higher Steel Prices Likely to Dent Leggett Q3 Earnings)

Mohawk Industries, Inc. (NYSE:MHK) is likely to benefit from its strategy of driving growth through acquisitions. These acquisitions broaden Mohawk’s product portfolio and expand its geographic footprint and market share. Since the beginning of 2017, the company has executed four buyouts.

We are also encouraged by Mohawk’s increased investments in product innovation, productivity and distribution. The company is introducing higher value products, adding service centers and unique merchandise in promotions to optimize each channel.

Mohawk Industries, Inc. Price and EPS Surprise

Mohawk Industries, Inc. Price and EPS Surprise | Mohawk Industries, Inc. Quote

The company’s third-quarter performance is likely to be affected by the recent hurricanes, which have resulted in considerable demand and supply disruption. Also, increased raw material costs, start-up expenses and currency headwinds continue to raise concerns.

For the third quarter, the Zacks Consensus Estimate for earnings stands at $3.74, reflecting an increase of 6.7% year over year. The Zacks Consensus Estimate for revenues is pegged at $2.46 billion, up 6.4% from the year-ago quarter.

(Read more: Will Hurricanes Dent Mohawk’s Q3 Earnings Performance?)

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