Mohawk Industries (MHK -2.22%) investors trounced the market on Friday, with the stock rising 8% by 1 p.m., compared to a 2% slump in the S&P 500. The surge put the flooring specialist closer to the wider market's 12% decline in 2022, but shares are still down over 20% so far this year.
The rally was sparked by a surprisingly strong earnings report.
Mohawk announced late Thursday that revenue for the selling period that ended in late March was up 17% after accounting for currency exchange swings. That result set a record for the business and was above management's forecast. In a Securities and Exchange Commission (SEC) filing, executives said Mohawk benefited from higher prices and strong demand for premium flooring and countertop products.
This demand wasn't pressured much by rising interest rates or inflation. "Sales of our products remain strong, and the design and features we are bringing to market give us competitive advantages," CEO Jeffrey Lorberbaum said in a press release.
Lorberbaum and his team say they are cautiously optimistic about the industry's continued growth ahead thanks to supportive economic trends like low unemployment and high demand for new homes among millennials. Yet more price increases are on the way across its portfolio, which may pressure sales volumes.
Mohawk has accelerated stock repurchase spending, based on a judgment by the management team that the stock is undervalued on a price-to-earnings basis. Investors appeared to agree with that belief on Friday as they sent shares higher. Mohawk's long-term returns, in contrast, will depend on the company's ability to continue managing through shifting demand and supply chain challenges as it builds a bigger global sales footprint.