Mohawk Industries (MHK)

Flooring manufacturer Mohawk Industries (NYSE:MHK) announced better-than-expected revenue in Q3 CY2025, with sales up 1.4% year on year to $2.76 billion. Its non-GAAP profit of $2.67 per share was 1.2% above analysts’ consensus estimates.

Company Overview

Established in 1878, Mohawk Industries (NYSE:MHK) is a leading producer of floor-covering products for both residential and commercial applications.

A healthy housing market is good for furniture demand as more consumers are buying, renting, moving, and renovating. On the other hand, periods of economic weakness or high interest rates discourage home sales and can squelch demand. In addition, home furnishing companies must contend with shifting consumer preferences such as the growing propensity to buy goods online, including big things like mattresses and sofas that were once thought to be immune from e-commerce competition.

Mohawk Industries' primary competitors include Shaw Industries (owned by Berkshire Hathaway NYSE:BRK.A), Armstrong Flooring (NYSE:AFI), Tarkett (EPA:TKTT), Interface (NASDAQ:TILE), and private company Mannington Mills.

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, Mohawk Industries’s 2.8% annualized revenue growth over the last five years was weak. This was below our standards and is a tough starting point for our analysis.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Mohawk Industries’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 2% annually.

This quarter, Mohawk Industries reported modest year-on-year revenue growth of 1.4% but beat Wall Street’s estimates by 1.6%.

Looking ahead, sell-side analysts expect revenue to grow 1.6% over the next 12 months. While this projection implies its newer products and services will spur better top-line performance, it is still below average for the sector.

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Mohawk Industries’s operating margin has shrunk over the last 12 months and averaged 6% over the last two years. The company’s profitability was mediocre for a consumer discretionary business and shows it couldn’t pass its higher operating expenses onto its customers.

In Q3, Mohawk Industries generated an operating margin profit margin of 5%, down 2.9 percentage points year on year. This contraction shows it was less efficient because its expenses grew faster than its revenue.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Mohawk Industries’s unimpressive 3.4% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.

In Q3, Mohawk Industries reported adjusted EPS of $2.67, down from $2.90 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 1.2%. Over the next 12 months, Wall Street expects Mohawk Industries’s full-year EPS of $8.91 to grow 14.9%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Mohawk Industries has shown weak cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 5%, subpar for a consumer discretionary business.

Mohawk Industries’s free cash flow clocked in at $310.3 million in Q3, equivalent to a 11.3% margin. This result was good as its margin was 3.7 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, leading to temporary swings. Long-term trends carry greater meaning.

Over the next year, analysts predict Mohawk Industries’s cash conversion will improve. Their consensus estimates imply its free cash flow margin of 5.5% for the last 12 months will increase to 8.2%, it options for capital deployment (investments, share buybacks, etc.).

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Mohawk Industries historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 3.7%, lower than the typical cost of capital (how much it costs to raise money) for consumer discretionary companies.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Mohawk Industries’s ROIC averaged 1.8 percentage point decreases each year. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Mohawk Industries reported $516.2 million of cash and $2.34 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $1.31 billion of EBITDA over the last 12 months, we view Mohawk Industries’s 1.4× net-debt-to-EBITDA ratio as safe. We also see its $16.5 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was encouraging to see Mohawk Industries beat analysts’ revenue expectations this quarter. On the other hand, its EPS guidance for next quarter missed. Overall, this quarter could have been better. The stock traded down 3% to $124.98 immediately following the results.

Updated: December 3, 2025 at 9:52 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Mohawk Industries.

We see the value of companies helping consumers, but in the case of Mohawk Industries, we’re out. To begin with, its revenue growth was weak over the last five years, and analysts don’t see anything changing over the next 12 months. On top of that, Mohawk Industries’s Forecasted free cash flow margin for next year suggests the company will fail to improve its cash conversion, and its organic sales performance has disappointed.

Mohawk Industries’s P/E ratio based on the next 12 months is 11.5x. This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $138.13 on the company (compared to the current share price of $115.19).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.