Goldman Sachs Trims Mohawk Industries From Conviction List, Maintains Bullish Stance

While the long-term outlook for Mohawk Industries Inc. MHK remains promising and competitive, near-term risks in the housing market and overall economy could constrain the flooring manufacuter's upside, according to Goldman Sachs.

The Analyst

Samuel Eisner of Goldman Sachs removed Mohawk from Goldman’s Conviction List and lowered the stock’s 12-month price target from $306 to $292 while maintaining a Buy rating.

The Thesis

Mohawk could see elevated risks in the first half of 2018 due to high D&A expenses on new capacity combined with a softer-than-expected housing market, Eisner said in a Thursday note. (See the analyst’s track record here.)

“Alongside ramping capacity that comes with underabsorption and increased D&A expense, we believe potential lumpy demand could lead to choppy performance for MHK.”

Home price appreciation — a primary driver of demand for repair and remodel services — has been muted in 2018 so far, the analyst said.

Despite the short-term cyclical uncertainty in the housing markets, the long-term outlook for flooring volumes, and therefore shares of Mohawk, remains strong, said Eisner.

“We view MHK as one of the better-positioned companies to capture additional upside from here.”

Price Action

Mohawk Industries shares were up 0.51 percent at $241.10 at the close Thursday.

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