Carpet and flooring manufacturer Mohawk Industries (NYSE:MHK) is hurting from a cyclical downturn in the residential housing market, but it appears to be withstanding any serious difficulties. In fact, it could be gearing up to take advantage of industry malaise.

So far today, Mohawk's stock is down more than roughly 4% in an overall down market, but the fact that it reported a 4% second-quarter earnings drop didn't help its case for staying above $100 a share. Sales also fell 4% as "the European business maintained its strong growth and performance partially offsetting the cyclical down turn in the U.S."

In terms of business, the core namesake carpet and rug segment saw a 10% sales decrease, while the ceramic tile unit saw a slight year-over-year fall. The Belgium-based Unilin laminate floor business saw a snazzy 16% improvement as a strong euro and more stable conditions overseas clearly helped offset tougher conditions here at home. Unilin accounted for less than 20% of total sales, but it made up the bulk of operating income for the quarter, as the larger Mohawk unit reported a significant 40% fall in income. Management "expects the U.S. residential environment to continue to be difficult during the third quarter."

On the brighter side, Mohawk continues to vacuum up debt and decreased its debt to capital to 38%. It also generated strong operating cash flow during the quarter, suggesting it has plenty of capital to withstand any protracted downturn in the industry. Lower debt also leaves plenty of ammo to snap up competitors on the cheap. Mohawk has a habit of growing through acquisitions. It recently acquired a couple of "pre-finished wood" plants, adding exposure to a category that it expects to grow 6% to 8% going forward, and demonstrating that domestic difficulties aren't seriously cramping its style.

Fellow Fool Emil Lee recently highlighted why Mohawk might interest value investors. It has already garnered the attention of famed value-investing funds such as Ariel Appreciation (CAAPX) and the Dreman Contrarian Mid-Cap Value (DRMVX), which have done well with the stock. Any further share price drop could make for another purchase opportunity.  

Emil also pointed out that Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B) is a major player in flooring via its Shaw business. Interface (NASDAQ:IFSIA) is an interesting small-cap play in the modular carpeting space. As Mohawk seeks to emerge from the current industry downturn stronger than before, Interface might make an interesting takeover target.                                

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Berkshire Hathaway is both an Inside Value and Stock Advisor pick.

Fool contributor Ryan Fuhrmann has no financial interest in any company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. Berkshire Hathaway is a Motley Fool Inside Value recommendation. The Fool has an ironclad disclosure policy.