Mohawk Industries (MHK) Stock Has a New Bear on Wall Street


Mohawk Industries (MHK) is like that driver motoring down the highway with the ever-blinking turn signal. Those following along behind are left wondering if that turn will ever come. RBC analyst Michael Dahl clearly doesn’t see any turnaround in MHK. The analyst has downgraded the stock from Sector Perform to Underperform (i.e., Sell), while cutting the price target to $115 (from $129). The new target implies about 8% downside from Friday’s closing price. (To watch Dahl’s track record, click here)

Dahl expects “continued competitive pressures, potentially heightened by an inventory build in LVT ahead of tariffs, and a negative mix shift will negate the potential benefit from lower input costs.” As a result, the analyst believes the stock will “underperform peers with cleaner growth/margin stories until MHK can show clear signs of operational improvements, which may take several quarters.”

Dahl stated, “The stock has clearly already been under tremendous pressure over the past year, and lower oil prices would normally help to boost margins and sentiment, but we expect continued elevated competitive pressures and negative mix shifts will negate these potential benefits, and we could also see a quicker pass-back of cost benefits in lower pricing given the demand challenges. Additionally, low cost LVT import competition, which has been taking share, will benefit in the near-term from the US-China tariff truce, creating potential for a further build in channel inventories even if higher tariffs ultimately take effect. This could continue the pressure on MHK’s ability to maintain market share and improve margins, representing risk to estimates. We now expect ‘19/’20 Adj. EBITDA of $1.64 BN/$1.68 BN vs. Street of $1.71 BN/$1.86 BN and our prior ’19 adj. EBITDA of $1.68 BN. We forecast ‘19/’20 Adj. EPS of $11.60/$12.18 vs. Street $11.76/$13.05.”

Based on the word of the Street, Dahl seems to be the sole bear running loose here. Out of 12 analysts polled by TipRanks in the last 3 months, 5 are bullish on Mohawk stock, 6 remain sidelined, with Dahl sounding the alarm. When considering if this stock is an overvalued or undervalued contender in the market, it is worthy of note that analyst expectations indicate nearly 9% return potential, with the 12-month average price target standing at $137.09. (See MHK’s price targets and analyst ratings on TipRanks)