Mohawk Industries Inc. (MHK): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

Summary:
We are initiating coverage on Mohawk Industries with a Neutral recommendation and a target price of $150. We are encouraged by the company's strong and diverse brand portfolio and leading market share position. Further, the company is trying to improve long-term results by focusing on opportunistic acquisitions, brand support via strong advertising, regular innovations and strong cash generation. However, the rising cost of raw materials like wood and petroleum based products can hurt Mohawk's profitability in the near future. Also, the global macroeconomic uncertainties remain a concern. We thus remain on the sidelines.

Overview:

Mohawk Industries, Inc. is a leading global manufacturer of flooring products that enhance residential and commercial spaces. The company manufactures carpet, rugs, ceramic tile, laminate, wood, stone and vinyl flooring. It has a global presence with operations in Australia, Brazil, Canada, China, Europe, India, Malaysia, Mexico, Russia and the United States. Mohawk has three reporting segments Carpet segment, Ceramic segment and Laminate and Wood segment.

The Carpet segment designs, manufactures, sources, distributes and markets its carpet and rug product lines for residential and commercial applications in both remodeling and new construction. In addition, the segment markets and distributes ceramic tile, laminate, hardwood, resilient floor covering, carpet pad and flooring accessories.

The Ceramic segment designs, manufactures, sources, distributes and markets a broad line of ceramic tiles, porcelain tiles and natural stone products used in the residential and commercial markets for both remodeling as well as new construction.

The Laminate and Wood segment designs, manufactures, sources, licenses, distributes and markets laminate and hardwood flooring used primarily in the residential market for both remodeling and new construction. In Europe, the segment also produces roofing elements, insulation boards, medium-density fiberboard, chipboards and other wood products. The segment acquired the fold-down patent with the acquisition of Pergo. In addition, it developed the patented UNICLIC glueless installation system and a variety of other technologies, such as beveled edges, multiple length planks and new surface and finish features from which the company generates licensing revenues.

On Jan 10, 2013, Mohawk Industries purchased Pergo a leading manufacturer of laminate flooring in the U.S. and the Nordic countries, for approximately $145 million.

On Apr 3, 2013, the company completed the acquisition of Marazzi a global manufacturer, distributor and marketer of ceramic tile, for roughly $1.5 billion.

On May 3, 2013, the company completed the acquisition of Spano, a Belgian chipboard manufacturer, for approximately $160 million.

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