Mohawk Industries (MHK) Q2 Earnings: What's In The Cards?

Mohawk Industries, Inc. (NYSE:MHK) is set to release second-quarter 2016 results on Aug 4.

Last quarter, this leading global manufacturer of flooring products posted a positive surprise of 2.15%. Mohawk Industries has surpassed estimates in three out of the past four quarters, resulting in an average positive surprise of 1.96%.

Let’s see how things are shaping up for this announcement.

Factors to Consider this Quarter

For the second quarter of 2016, the company expects earnings per share in the range of $3.29 to $3.38, which indicates 22% to 26% year-over-year increase. The U.S. residential and remodeling sector is gaining momentum, which should result in strong demand for Mohawk’s products.

However, slowdown in the emerging markets is a concern. The slowing economic growth in China may hurt Mohawk as it has a considerable presence in that country. Further, the Russian economy is currently in recession and the company believes that it will continue to face headwinds there through 2016, owing to low oil prices. Also, a slowdown in Europe is a major concern. Moreover, despite some improvement, unfavorable currency remains a major overhang and may hurt Mohawk’s profitability in the near term.

Earnings Whisper

Our proven model does not conclusively show that Mohawk Industries is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: The ESP for Mohawk Industries is 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $3.36 per share.

Zacks Rank: Mohawk Industries holds a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are some companies in the broader consumer discretionary sector that can be considered as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Pool Corporation (NASDAQ:POOL) , with an Earnings ESP of +1.0% and a Zacks Rank #2.

CBS Corporation (NYSE:CBS) with an Earnings ESP of +0.98% and a Zacks Rank #2.

Starz (NASDAQ:STRZA) with an Earnings ESP of +16.0% and a Zacks Rank #2.

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