- Q4 Net Sales: $2.7 billion, +2.4% reported, -3.3% constant basis; <b>Adjusted EPS:</b> $2.00, +3% YoY driven by productivity and lower interest.
- Full-Year Sales: $10.8 billion, flat YoY; <b>Adjusted EPS:</b> $8.96, -7.5% YoY; <b>Free Cash Flow:</b> $620 million, $149 million spent on share buybacks.
- Segment Performance: Global Ceramic +6.1% sales, $63M income; Flooring Rest of World +6.5% sales, $65M income; Flooring North America -4.8% sales, $39M income.
- 2026 Guidance: CapEx of $480 million; $60–70 million productivity savings; EPS guidance of $1.75–1.85 (Q1); $100 million annualized tariff impact mitigated via pricing.
- Balance Sheet Strength: $806 million cash; $2.7 billion inventories; $4.8 billion PPE; plans to invest in product innovation and cost reductions amid inflationary pressures.
Segment Performance
The company's segments performed variably, with Global Ceramic having sales of $1.1 billion, a 6.1% increase as reported, and operating income of $63 million. Flooring North America had sales of $893 million, a 4.8% decrease, with operating income of $39 million. Flooring Rest of the World had sales of $737 million, a 6.5% increase as reported, with operating income of $65 million.
Balance Sheet and Cash Flow
The company's balance sheet remains strong, with cash and cash equivalents of $806 million, free cash flow of $270 million in the quarter, and $620 million year-to-date. Inventories were $2.7 billion, and property, plant, and equipment were $4.8 billion. The company plans to invest $480 million in 2026, focused on product innovation, cost reduction, and maintenance.
Outlook and Guidance
For 2026, the company expects its markets to remain competitive, with benefits from product mix, productivity, and cost reductions offsetting headwinds from higher energy and labor costs. The company anticipates first-quarter adjusted EPS to be between $1.75 and $1.85, excluding any restructuring or one-time charges. Analysts estimate next year's revenue growth at 3.0%.
Valuation
With a P/E Ratio of 22.08, the stock appears to be fairly valued. The EV/EBITDA ratio of 8.66 suggests a reasonable valuation. The company's ROE of 4.5% and ROIC of 3.62% indicate a relatively low return on equity and invested capital, respectively.
Operational Highlights
The company's hard surface business is performing well, driven by waterproof laminate and domestic laminate products. The LVT business is also seeing growth, with new hybrid alternatives being well-received by the market. The ceramic business is doing well, with a strong commercial business and improving style and design.
Inflation and Pricing
The main drivers of inflation for Mohawk Industries are wage and benefit increases, energy costs, tariffs, and general expenses. The company has announced targeted price increases to offset inflation, which is not easy due to a weak category and pressure to maintain prices. Jeffrey S. Lorberbaum noted that input costs are going up, and they are trying to get some of it covered through the marketplace.