Mohawk's Q1 Earnings Beat Estimates, Revenues Lag, Both Down Y/Y

Core Viewpoint - Mohawk Industries, Inc. reported mixed results for Q1 2025, with earnings exceeding estimates while net sales fell short, reflecting a year-over-year decline in both metrics [1][5]. Financial Performance - Adjusted EPS was $1.52, surpassing the Zacks Consensus Estimate of $1.41 by 7.8%, but down from $1.86 in the prior year [5]. - Net sales reached $2.53 billion, missing the consensus estimate of $2.57 billion by 1.8% and declining 5.7% year-over-year from $2.68 billion [5]. - Adjusted gross margin contracted by 30 basis points to 24.1%, while adjusted operating margin decreased by 130 basis points to 4.8% [6]. Segment Performance - Global Ceramic segment sales totaled $993.8 million, down 4.9% year-over-year, with adjusted sales up 1.2% to $1.057 billion [7]. - Flooring North America reported net sales of $862.4 million, down 4.2% year-over-year, with adjusted net sales at $890.2 million [8]. - Flooring Rest of the World saw net sales decrease by 8.8% year-over-year to $669.6 million, with adjusted sales down 2.9% to $713.3 million [9]. Market Conditions and Challenges - The company faced challenges from two fewer shipping days, foreign exchange headwinds, and a new order system in Flooring North America, although service levels have normalized [2][3]. - Market conditions weakened, particularly in residential remodeling, with consumer confidence declining and global tariffs complicating the situation [3][12]. - The company anticipates an annualized cost of around $50 million due to tariffs at the current 10% rate, and is focusing on inventory management and pricing adjustments [3][12]. Future Outlook - Despite current challenges, the company remains optimistic about the long-term prospects of the flooring market, expecting a significant rebound as industry volumes return to historical levels [4]. - The company projects adjusted EPS for Q2 2025 in the range of $2.52-$2.62, down from $3 in the prior year [15].