Mohawk Industries outlines $32M in new annual savings and projects Q4 EPS of $1.90-$2 amid market headwinds

Earnings Call Insights: Mohawk Industries (MHK) Q3 2025

MANAGEMENT VIEW

* CEO Jeff Lorberbaum reported "our third quarter net sales of $2.8 billion were in line with our expectations, slightly ahead of prior year as reported and flat on a constant basis." He emphasized that "though economic conditions across our regions weakened more than anticipated compared to the prior quarter, we believe we outperformed in most of our markets." The CEO highlighted that sales and product mix benefited from premium residential and commercial offerings, with adjusted earnings per share of $2.67 reflecting ongoing productivity and restructuring initiatives, favorable currency exchange, and lower interest expense, partially offset by higher input costs and temporary plant shutdowns.
* Lorberbaum announced, "we've identified additional restructuring opportunities to rationalize less efficient assets and streamline logistics operations and administrative functions. These new actions will result in annualized savings of approximately $32 million at a net cash cost of approximately $20 million after asset sales." He added, "combined with our previously announced restructuring actions, we anticipate delivering $110 million in savings this year."
* The CEO noted, "we repurchased 315,000 shares in the quarter for approximately $40 million as part of our current stock buyback authorization. Year-to-date, we've purchased $108 million of our outstanding shares."
* CFO James Brunk stated, "sales for the quarter were just shy of $2.8 billion. That's a 1.4% increase as reported and flat on a constant basis as our hard surface and commercial business continued to outperform the overall residential channels."
* Brunk detailed, "gross profit for the quarter was 23.7% as reported and 25.3%, excluding charges, as strengthening productivity of $57 million and favorable impact of FX of $15 million were offset by higher input costs of $39 million, continued pressure on price/mix of $20 million and lower volume and temporary shutdown costs of $23 million."
* President and COO Paul De Cock noted, "in the Global Ceramics segment, our performance benefited from our premium collections, commercial sales and expanded distribution. All of our markets faced pricing pressure due to excess industry capacity, though we were able to offset due to the strength of our product and channel mix."

OUTLOOK

* Lorberbaum said, "given these factors, we expect our fourth quarter EPS to be between $1.90 and $2 with 1 additional shipping day and excluding any restructuring or other onetime charges."
* Management indicated that "market volume should remain soft through the end of the year" and ongoing restructuring is expected to deliver further cost savings.
* Brunk forecasted "in Q4 and for the full year a tax rate of approximately 18%."

FINANCIAL RESULTS

* Adjusted earnings per share for Q3 was $2.67. Earnings per share as reported was $1.75.
* Free cash flow for the quarter was $310 million.
* Global Ceramic sales were just over $1.1 billion; Flooring North America sales were $937 million; Flooring Rest of the World sales were $716 million.
* Operating income on an adjusted basis for Global Ceramic was $90 million, for Flooring North America $68 million, and for Flooring Rest of the World $59 million.
* CapEx for the quarter was $76 million. Cash and cash equivalents were $516 million.
* Brunk commented, "overall, the balance sheet is in a very strong position with gross debt of $1.9 billion and leverage at 1.1x."

Q&A

* John Lovallo, UBS: Asked about changes since July affecting Q4 EPS outlook and revenue/margin expectations. Brunk responded, "conditions did weaken since we last talked during the quarter with interest rates remaining elevated. The other aspect is consumer confidence decline, which affected our remodeling. Builders have actually slowed a little bit from a construction standpoint and international markets have softened. Inflation has eased, but our costs are still higher than the prior year."
* Matthew Bouley, Barclays: Questioned price increases related to tariffs. De Cock answered, "we have also announced in the third quarter additional price increases, both to recover the tariffs and to recover inflation in carpet. For the tariffs, we announced an additional price increase between 5% and 10%."
* Collin Verron, Deutsche Bank: Asked about raw material cost declines and margin impact. Brunk replied, "in the fourth quarter, we will see raw material prices easing from their peak earlier in the year. Energy and wages will continue to be higher than last year."
* Susan Maklari, Goldman Sachs: Inquired about new product launches and their momentum. Lorberbaum explained, "every one of the businesses has product innovation coming through it... In the LVT collections, they are updating the decorating trend as well as we're introducing PVC alternatives that we just lump into a group we call hybrid."
* Adam Baumgarten, Vertical Research: Asked if the industry is now more coordinated from a tariff-driven price increase perspective. Lorberbaum: "I'm not sure it's coordinated. The whole industry has the same impacts from the tariffs going up... we're assuming it will take until the first of the year for it to level out."

SENTIMENT ANALYSIS

* Analysts expressed slightly negative to neutral sentiment, focusing on tariff impacts, price increases, and cost structure, with some concern over demand and margin trajectory. There was persistent questioning about the timeline for margin recovery and competitive dynamics.
* Management maintained a measured but confident tone in prepared remarks, emphasizing cost reductions, productivity gains, and readiness for market recovery. In Q&A, responses were occasionally defensive or cautious, especially regarding demand visibility and tariff pass-throughs, as seen with phrases like "we believe..." and "we hope...".
* Compared to the previous quarter, analyst and management tone both shifted to more cautious and defensive, with greater emphasis on macroeconomic headwinds and the timing of recovery.

QUARTER-OVER-QUARTER COMPARISON

* Q3 guidance for Q4 EPS ($1.90-$2) is lower than the Q2 guidance for Q3 EPS ($2.56-$2.66), reflecting a more cautious outlook due to weaker demand and ongoing cost pressures.
* Management increased total annualized restructuring savings targets to $110 million, up from $100 million last quarter, with an additional $32 million in new annualized savings initiatives announced.
* Free cash flow improved to $310 million from $125 million in Q2, and the share repurchase program continued.
* Strategic focus remains on restructuring, cost reduction, and product innovation, but management now projects persistently soft volume through year-end, versus prior quarter's hope for sequential improvement.
* Analysts’ questions shifted more heavily toward tariffs, price/mix recovery, and cost inflation, with less emphasis on new product momentum.

RISKS AND CONCERNS

* Management cited ongoing consumer uncertainty and postponement of large renovation projects as key headwinds.
* Tariff impacts remain a significant risk, with management implementing price increases and supply chain optimization but noting it will take time for the market to reach equilibrium.
* Energy, wage, and material costs remain elevated compared to last year.
* Analysts raised concerns about timing and adequacy of price increases, competitive dynamics, and potential for further demand deterioration.

FINAL TAKEAWAY

Management reported that Mohawk Industries is navigating a challenging market environment with targeted restructuring actions, new product introductions, and supply chain optimizations to address persistent input cost pressures and tariff impacts. While the company anticipates soft demand to continue through the end of the year, ongoing operational enhancements, annualized savings of $110 million, and an expected fourth quarter EPS range of $1.90 to $2 signal a commitment to maintaining financial strength and positioning the business for recovery when market conditions improve.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/mhk/earnings/transcripts]

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