However, analysts Mike Wood and Drew Levine have not changed their target price of $228 on the stock. The lead analyst reiterated its Outperform rating, citing considerable benefits from productivity in the upcoming periods.
The brokerage estimates $140 million gain from productivity initiatives in the current year based on $70 million gains in the first half. For the year 2017, there could be more margin expansion compared to the year 2016.
"Anything above MHK's ~$100–125 million maintenance CAPEX carries a 2–5 year payback. CAPEX is a mixture of smaller projects such as equipment purchases (immediate benefits) and longer-term projects (2–4 years to optimize) such as plant expansions and process changes," the analysts said in a research note to clients.
Referring to CAPEX, the brokerage expects Mohawk to maintain $500 million–$600 million levels until the housing cycle remains favorable apart from low borrowing costs. Currently, the company is spending about 1.5 percent average borrowing costs. The analyst pointed out that the company is performing to its full capacity in several products due to its investments.
At time of writing, Mohawk was seen trading at $206.65, up 0.14 percent on Tuesday.
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