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Here's Why Shares of Mohawk Industries Hit the Floor on Friday

By Lou Whiteman - Jul 26, 2019 at 1:57PM

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The flooring specialist sees a difficult few quarters ahead.

What happened

Shares of Mohawk Industries (MHK 0.77%) were trading down 16% as of 1:50 p.m. on Friday afternoon. This came after the flooring specialist warned it expects a "difficult" business environment in the second half of 2019, reversing solid gains experienced in the first half of the year.

So what

After markets closed Thursday, Mohawk said it earned $2.89 per share in the second quarter on sales of $2.6 billion, beating the consensus estimate of $2.87, but falling short on revenue by about $200 million. The results included a negative impact of about $9 million due to the strength of the U.S. dollar.

A carpet installer at work

Image source: Getty Images.

Mohawk CEO Jeffrey S. Lorberbaum said in a statement that "most markets we operate in remain soft, with pressure on volume and pricing, and we anticipate the environment to remain difficult."

Lorberbaum said Mohawk is taking action to address the uncertain business environment, with plans to streamline operations, consolidate facilities, and take out higher-cost assets. "We are reducing overhead structures and controlling investments," he said. "We are improving our administrative costs while investing in sales to support new products and enter new geographies."

Now what

Mohawk had been a highflier heading into the earnings report, with shares up more than 30% year to date prior to Friday's drop, and recovering from a difficult second half of 2018. The company's post-earnings warning zapped that momentum, and based on Lorberbaum's commentary, it appears unlikely Mohawk will be able to restart the growth engine quickly.

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Mohawk Industries, Inc. Stock Quote
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