We expect Mohawk Industries, Inc. MHK to beat expectations when it reports its first-quarter 2015 results on May 7. Last quarter, it posted a positive surprise of 2.25%.
Why a Likely Positive Surprise?
Our proven model shows that Mohawk Industries is likely to beat earnings estimates because it has the right combination of two key ingredients.
Zacks ESP: Mohawk Industries currently has an Earnings ESP, of +3.11%. This is because the Most Accurate estimate stands at $1.66, while the Zacks Consensus Estimate is pegged lower at $1.61.This indicates a likely positive surprise for the company.
Zacks Rank: Mohawk Industries’ carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank of #1, 2 and 3 have a significantly higher chance of beating estimates.
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
The combination of Mohawk Industries’ Zacks Rank #3 and +3.11% ESP makes us confident in looking for a positive surprise on May 7.
What's Driving the Better-than-Expected Earnings?
Mohawk has heavy exposure to the U.S. residential sector and its revenues are expected to increase as housing demand gains traction during the ongoing spring selling season. The company expects quarterly results to be driven by overall economic improvement and growth in the flooring market in the U.S.
For the first quarter of 2015, Mohawk Industries expects adjusted earnings per share (excluding the impact of restructuring charges and new acquisitions) to be within $1.54 to $1.63.
Other Stocks to Consider
Here are some other companies from the consumer staples sector that can be considered as our model shows that they have a favorable combination of elements:
- Coach, Inc. COH with an Earnings ESP of +3.45% and a Zacks Rank #3
- Post Holdings, Inc. POST with an Earnings ESP of +54.55% and a Zacks Rank #2 (Buy)
- Interface Inc. TILE with an Earnings ESP of +3.7% and a Zacks Rank #1 (Strong Buy)
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