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MOHAWK INDUSTRIES INC (MHK) Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $2.64B; reported EPS $1.48 and adjusted EPS $1.95. Adjusted EPS exceeded the company’s prior Q4 guidance range ($1.77–$1.87), helped by productivity gains and lower interest expense, despite unfavorable price/mix and inflation headwinds .
  • Segment results were mixed: Global Ceramic and Flooring North America net sales grew modestly, but margins compressed; Flooring Rest of World saw sales decline and margin pressure from competitive pricing and rising input costs .
  • 2024 free cash flow was $680M; year-end liquidity ~$1.6B; net debt/adj. EBITDA improved to 1.1x. The company repurchased ~1.3M shares for $161M in 2024 and ~$74M in Q4, supporting capital allocation flexibility .
  • Q1 2025 adjusted EPS guidance is $1.34–$1.44, including a ~$0.35 EPS headwind from Flooring North America’s order management system conversion; management expects normal seasonality into Q2 absent further system impacts .
  • Catalysts: Guidance beat vs company expectations; initial 2025 outlook tempered by system conversion impact, FX headwinds, and rising energy/material costs; potential tailwinds from EU tariffs on Chinese wood flooring and ongoing restructuring savings (~$285M annualized by 2026) .

What Went Well and What Went Wrong

What Went Well

  • Productivity and restructuring actions lifted performance; adjusted operating margin of 6.1% (vs 6.7% LY) with tangible productivity offsets to price/mix pressure, and lower interest expense supporting EPS; adjusted EPS of $1.95 beat company Q4 guidance range .
  • Segment highlights: Global Ceramic delivered improved adjusted operating margin (5.3%) via cost containment and process improvements; Flooring North America maintained sales across channels with hard surface growth and market share gains in PETPremier carpets .
  • Strong cash generation and balance sheet: Q4 FCF $236M and FY FCF ~$680M; net debt/adj. EBITDA improved to 1.1x; share repurchases of ~$74M in Q4 and ~$161M for FY enhanced capital return .

What Went Wrong

  • Price/mix and inflation headwinds compressed margins across segments; adjusted gross margin fell to 24.4% (vs 24.7% LY) and adjusted operating margin to 6.1% (vs 6.7% LY) .
  • Flooring Rest of World margins compressed due to competitive pricing and rising material/labor costs; insulation demand remained weak; announced price increases to offset inputs .
  • Q1 2025 outlook pressured by Flooring North America’s order management system conversion (operating income hit $25–$30M; ~$0.35 EPS impact), FX headwinds from a stronger USD, and rising energy/material costs with lagged P&L impact into Q2–Q3 .

Financial Results

Consolidated P&L vs Prior Quarters

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Billions)$2.801 $2.719 $2.637
Diluted EPS (Reported) ($)$2.46 $2.55 $1.48
Adjusted EPS ($)$3.00 $2.90 $1.95
Adjusted Gross Margin (%)27.1% 26.2% 24.4%
Adjusted Operating Margin (%)9.2% 8.8% 6.1%

Year-over-Year (Q4 2024 vs Q4 2023)

MetricQ4 2023Q4 2024
Revenue ($USD Billions)$2.612 $2.637
Diluted EPS (Reported) ($)$2.18 $1.48
Adjusted EPS ($)$1.96 $1.95
Adjusted Gross Margin (%)24.7% 24.4%
Adjusted Operating Margin (%)6.7% 6.1%

Segment Breakdown (Sales and Adjusted Operating Margin)

SegmentQ2 2024 Sales ($MM)Q3 2024 Sales ($MM)Q4 2024 Sales ($MM)Q2 2024 Adj. Op Margin (%)Q3 2024 Adj. Op Margin (%)Q4 2024 Adj. Op Margin (%)
Global Ceramic$1,115.6 $1,058.0 $1,008.2 8.5% 8.6% 5.3%
Flooring North America$958.5 $974.0 $937.2 8.6% 9.1% 5.7%
Flooring Rest of World$727.2 $687.0 $691.8 12.6% 10.5% 10.0%

KPIs and Balance Sheet

KPIQ2 2024Q3 2024Q4 2024
Free Cash Flow ($MM)$142.2 $204.2 $236.2
Adjusted EBITDA ($MM)$405.8 $392.4 $310.4
Net Debt ($MM)$1,912.1 $1,757.7 $1,570.2
Net Debt / Adjusted EBITDA (x)1.3 1.2 1.1
Inventory Days (days)—131 134

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EPSQ4 2024$1.77–$1.87 $1.95 (actual) Raised vs guidance (actual above range)
Adjusted EPSQ1 2025N/A$1.34–$1.44; includes ~$0.35 EPS impact from NA system issues New guidance; negative impact identified
Non-GAAP Tax RateQ1 & FY 20252024 Q4 17–18%; FY ~20% Q1 and FY 2025: 20–22% Range widened/higher midpoint
CapexFY 20252024 plan ~$450M ~$520M Increased
Restructuring Savings (Annualized)Through 2026~$100M plan announced (timing through 2025–2026) ~$285M annualized by 2026 Increased target
NA Order Mgmt System ImpactQ1 2025N/AOperating income hit $25–$30M; shipments normalized; invoicing delays being addressed ; EPS impact ~$0.35 New one-time negative identified

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Q3 2024Current Period (Q4 2024)Trend
Macro demand, housing turnoverWeak residential; consumers trading down; restructuring $100M to cut costs Hurricanes to hit Q4 $25–$40M; continued weak demand; adjusted Q4 EPS guide $1.77–$1.87 Demand still soft; Q4 beat vs company guide; Q1 seasonally weak; normal seasonality expected into Q2 Stabilizing but subdued
Pricing/mix pressureBroad pricing pressure; mix impacted by trade-down Price/mix headwind persists; margins offset by productivity Price/mix and inflation still pressuring margins Ongoing headwind
Energy/material costsLower energy/material costs aided margins Lapping deflation; inflation returns in Q4 Natural gas rising; lagged P&L impact into Q2–Q3 Turning inflationary
FX (USD strength)FX headwinds —Strong USD a drag on translated results Negative
Supply chain/system—Port strike stocking talk; shutdowns to manage inventory NA order mgmt system conversion: invoicing delays; $25–$30M OI hit; $0.35 EPS impact; processes mostly corrected One-time Q1 drag
Tariffs/regulatoryUS antidumping investigation into Indian ceramic tile; potential high tariffs Hurricane impacts; regulatory uncertainty EU >40% tariffs on Chinese wood flooring could benefit laminate/LVT/wood Potential tailwind
Product innovationLaminate/LVT growth; waterproof laminate expansion Laminate/LVT gaining share; resilient plank tech PETPremier carpet share gains; recycled PVC-free resilient alternative; premium collections Positive mix potential
Restructuring savingsAnnounced $100M annualized, cash cost ~$40M Productivity $44M in Q3; further cost-outs Cumulative restructuring to ~$285M annualized by 2026; ~$80M realized in 2024; ~$100M expected in 2025 Increasing savings trajectory

Management Commentary

  • “Our fourth quarter results exceeded our expectations as sales actions, restructuring initiatives and productivity improvements benefited our performance.”
  • “We generated free cash flow of $680 million and repurchased 1.3 million shares of our stock for $161 million. We ended the year with available liquidity of approximately $1.6 billion and debt leverage of 1.1 times.”
  • “Given these factors, we expect our first quarter adjusted EPS will be between $1.34 and $1.44… This guidance includes an estimated EPS impact of $0.35 due to the Flooring North America system issues.”
  • “In December, the European Union introduced tariffs of more than 40% on Chinese wood flooring, which should benefit our sales of laminate, LVT and wood.”
  • “Our cumulative restructuring actions will generate annualized savings of approximately $285 million when completed in 2026.”

Q&A Highlights

  • Seasonality and 2025 cadence: Management anticipates normal seasonal improvement from Q1 to Q2 on an adjusted baseline, absent further system impacts .
  • Order management system impact: ~$15–$20M extraordinary costs and ~$25–$50M sales impact in Q1; customers now shipping normally with remediation underway; limited long-term relationship impact expected .
  • Energy and FX: Natural gas increases expected to flow through P&L over ~one quarter; FX drag could be ~$7–$10M to operating income in Q1 .
  • Pricing and capacity utilization: Industry utilization ~70–80% vs >90% historically; competitive pricing persists; limited price pass-through in current environment .
  • Capital allocation: Continued buybacks opportunistically; since 2020 purchased 14% of shares ($1.6B total); 2025 capex plan ~$520M focused on product innovation and cost reduction .

Estimates Context

  • S&P Global consensus estimates for Q4 2024 (EPS, revenue, EBITDA) were unavailable due to data-access limits at the time of this analysis; therefore, we cannot present a beat/miss versus Wall Street consensus. We note Q4 adjusted EPS of $1.95 was above the company’s prior guidance range ($1.77–$1.87) .

Key Takeaways for Investors

  • Q4 adjusted EPS beat vs company guidance despite price/mix and inflation headwinds; productivity and lower interest costs provided offsets .
  • Near-term caution: Q1 2025 guide embeds ~$0.35 EPS headwind from NA system conversion; expect seasonality improvement into Q2 as systems normalize .
  • Structural efficiency: Restructuring savings ramp to ~$100M incremental in 2025 and ~$285M annualized by 2026 support medium-term margin recovery when volumes rebound .
  • Policy tailwinds: EU tariffs (>40%) on Chinese wood flooring may benefit Mohawk’s laminate/LVT/wood portfolios in Europe; monitor regional mix improvements and pricing .
  • FX and input costs: Strong USD and rising energy/material costs are headwinds; lagged cost impact likely more visible in Q2–Q3—watch for incremental pricing/mix strategies and productivity offsets .
  • Capital deployment: Balance sheet optionality (net debt/adj. EBITDA 1.1x) enables continued buybacks and selective investment; 2025 capex prioritizes innovation and cost reduction .
  • Medium-term thesis: As housing turnover normalizes and deferred remodeling returns, higher mix and better utilization should expand margins; company positioning and restructuring support operating leverage in recovery .

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