It's not easy selling carpet tile these days. Shares of Interface (NASDAQ:TILE) took an 18% hit last week after posting its latest quarterly results.
The world's largest maker of modular carpet -- pieces of carpet that lock into place for easy installation -- saw sales for the third quarter clock in at $254.7 million. That may be a mere 1% improvement from a year earlier, but if we adjust those results to account for the strengthening dollar Interface came through a nearly 10% top-line advance on a constant currency basis.
Interface was generally successful worldwide. Revenue in the Americas rose 7%, and Asia-Pacific sales climbed 5% despite a 9% decline in China. The biggest growth came in Europe, up nearly 20% since the prior year.
The news actually gets better on the way to the bottom line, as expanding margins resulted in earnings more than doubling to $0.31 a share. That seems impressive, but the stock still took a hit as sales fell short of expectations with profitability simply meeting Wall Street's target. The silver lining here is that the shares are still trading 19% higher so far in 2015, even after last week's hit.
Carpet tile remains a popular flooring choice, particularly in the corporate realm where the easy installation, maintenance, and replacement characteristics have made its namesake and FLOR brands easy sellers. At least one Wall Street pro sees the drop as an overreaction. Stifel Nicolaus upgrade the stock from "hold" to "buy" and slapped a $24 price target on the shares.
Investors in flooring stocks haven't had a lot of time to admire the ceiling. Trex (NYSE:TREX) experienced a much smaller hit after it posted quarterly results last week that also failed to impress the market. Trex is the leading maker of wood-alternative deck flooring and related materials.
Hardwood flooring retailer Lumber Liquidators (NYSE:LL) continues to be one of this year's worst performers. Things just haven't been the same since the discounter was called out on prime-time television on the safety of its Chinese-sourced laminates. Shares of Lumber Liquidators moved higher in October. It's one of the only two months of 2015 where the stock has inched higher, but it has still shed 79% of its stock price this year.
Lumber Liquidators reports on Wednesday, giving it an opportunity to continue to claw back in November.
With Lumber Liquidators trading considerably lower this year and Trex stock still in negative territory for 2015, Interface remains the niche's market darling. Last week's stock drop wasn't fun, but the fundamentals appear largely in place at Interface.
Rick Munarriz has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Interface, Lumber Liquidators, and Trex. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.