MOHAWK INDUSTRIES INC (MHK) Q3 2025 Earnings Summary

Executive Summary

• Q3 revenue and adjusted EPS modestly beat consensus: $2.76B vs $2.73B*, and $2.67 vs $2.64*; adjusted EBITDA was slightly below consensus ($359M vs $363M*) as pricing pressure and shutdown costs offset productivity gains .*
• Mix remained favorable (premium/commercial), and restructuring drove savings; company raised 2025 savings plan to ~$110M (from ~$100M), generated $310M FCF, and repurchased $40M shares .
• Q4 adjusted EPS guidance: $1.90–$2.00 (one extra shipping day), tax rate ~18%; 2025 capex cut to ~$480M (from ~$500M), with $60–$70M incremental restructuring tailwind targeted for 2026 .
• Tariff pass-through in progress (additional 5–10% pricing on impacted categories; ~5% in carpet); average import tariff impact estimated at 20% ($110M annualized) before mitigations; lower ocean freight partially offsets .

What Went Well and What Went Wrong

• What Went Well

  • Adjusted EPS beat the top end of Q2 guidance ($2.67 vs $2.56–$2.66) and modestly beat Street; CEO: “Our results reflected benefits from ongoing productivity and restructuring initiatives as well as the impact of favorable currency exchange and lower interest expense” .
  • Strong FCF and disciplined capital allocation: ~$310M FCF, $40M buybacks; YTD repurchases $108M .
  • Mix/product strength and commercial resilience: Global Ceramic and hard surfaces outperformed; “our premium residential and commercial offering… continued to benefit” .

• What Went Wrong

  • Margin pressure persisted: adjusted gross margin 25.3% (down ~90 bps YoY) and adjusted operating margin 7.5% (down ~130 bps YoY) on higher input costs, competitive pricing, and shutdown costs .
  • Flooring North America softness (-3.8% sales YoY) and margin compression (adj op margin 7.2% vs 9.1% LY) amid price pressure and higher costs .
  • Tariff implementation causing near-term volatility; CFO quantified an annualized ~$110M gross headwind before mitigations; realization of price increases takes time given channel inventories .

Financial Results

• Beat/miss: Revenue +$27M vs consensus; Adjusted EPS +$0.03 vs consensus; Adjusted EBITDA slightly below (-$3.6M) vs consensus. Bold implications: modest top/bottom-line beat despite margin pressure; EBITDA a touch light*. .*

Segment performance

KPIs and balance sheet

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• Strategic focus: “We are lowering our cost structure without impacting our long-term growth potential… operational enhancements, administrative process improvements and technology advancements” .
• Guidance and outlook: “We expect our fourth quarter EPS to be between $1.90 and $2.00, with one additional shipping day and excluding any restructuring or other one-time charges” .
• Margin drivers: “Gross profit… 23.7% as reported and 25.3% excluding charges. Strengthening productivity of $57M and favorable FX of $15M were offset by higher input costs of $39M, continued pressure on price mix of $20M, and lower volume and temporary shutdown costs of $23M” .
• Tariffs & pricing: “For the tariffs, we announced an additional price increase between 5% and 10%. For carpet, we have announced approximately 5%” . “Average… approximately 20% on all of the imported products… about a $110 million impact before any mitigations” .

Q&A Highlights

• Tariff pass-through and timing: Management expects tariff pricing to flow through over several months as channel inventories normalize; guidance incorporates tariff impacts; industry actions should equilibrate by early 2026 .
• 2026 bridge: ~$60–$70M restructuring benefits expected next year plus ongoing productivity; plan is for pricing/productivity to offset inflation as 2026 begins .
• Shipping days modeling: Q1’26 has +4 shipping days (~6.5% sales tailwind); flow-through depends on mix; Q4’25 has +1 day .
• Segment color: FNA margins pressured by input costs, price mix and shutdowns; Ceramic benefits from commercial exposure and premium innovation; ROW margins pressured by price/mix despite productivity .
• Capital allocation: Continued balanced approach; YTD buybacks $108M; strong balance sheet (1.1x net debt/adj EBITDA) .

Estimates Context

• Q3 2025 vs S&P Global consensus: Revenue $2.76B vs $2.73B* (beat); Adjusted EPS $2.67 vs $2.64* (beat); Adjusted EBITDA $359.4M vs $363.0M* (slight miss) .*
• Q4 2025 outlook: Company guides $1.90–$2.00 adjusted EPS; Street at ~$1.98* is centered within the range, implying broadly in-line guidance bias.*
• FY 2025/2026: Consensus EPS ~$8.94* and ~$10.04* respectively; Revenue ~$10.77B* and ~$11.00B*; estimate trajectories could modestly tick up on Q3 beat and higher 2025 savings, but tariff realization and pricing cadence remain key swing factors.*

Values marked with * are retrieved from S&P Global.

Key Takeaways for Investors

• Execution despite weak demand: Modest top-line and EPS beats driven by mix, FX, and restructuring, with FCF acceleration; setup for further cost tailwinds into 2026 .
• Near-term margin cap: Competitive pricing, input costs, and temporary shutdowns kept adjusted gross/operating margins below prior year; watch tariff pass-through pace and price/mix recovery .
• Tariff dynamics a two-edged sword: Gross headwind (~$110M annualized) but pricing actions and domestic footprint (advantaged vs imports) should support share/mix as industry equilibrates .
• Guidance credible and conservative: Q4 EPS range brackets Street; tax rate lowered to ~18% and capex trimmed to ~$480M reduce execution risk .
• Balance sheet optionality: 1.1x leverage, strong liquidity, and ongoing buybacks provide flexibility for opportunistic capital deployment and M&A as cycle turns .
• Watch commercial indicators: Backlogs stable but some slowing signals; residential should benefit gradually from lower rates and pent-up remodeling demand .
• Stock narrative catalysts: Evidence of tariff price realization, sequential margin improvement, and validation of 2026 savings bridge are likely to drive estimate revisions and sentiment.