Mohawk Industries Q1 Earnings Call Highlights

Key Points

• Q1 results: Mohawk reported adjusted EPS of $1.90, up about 25% year‑over‑year, on roughly $2.7 billion of sales (up 8% reported, down 2.6% constant currency), with margins aided by productivity and restructuring but weighed by inflation and weaker residential volumes.
• Cost and pricing outlook: Management said the intensifying Middle East conflict has raised energy and raw‑material volatility, prompting announced price increases generally in the mid‑to‑high single digits and warning that cost inflation is expected to ramp in the second half as inventory costs flow through.
• Balance sheet and guidance: Mohawk repurchased 607,000 shares for $64 million, finished the quarter with $872 million cash and net debt of $1.2 billion (net debt/EBITDA 0.9%), and guided Q2 adjusted EPS of $2.50–$2.60 while planning about $480 million of 2026 CapEx.

Mohawk Industries NYSE: MHK reported first-quarter 2026 results that management said were in line with expectations despite soft residential demand and rising cost pressures tied to an intensifying Middle East conflict.

First-quarter results reflect productivity and restructuring gains

Chairman and CEO Jeff Lorberbaum said adjusted earnings per share were $1.90, up about 25% year over year. He attributed the improvement to “benefits from productivity, restructuring, and product mix, offset by inflation and volume.” He also noted the prior year was impacted by an order management system conversion and had four fewer days.

Net sales were approximately $2.7 billion, up 8% as reported but down 2.6% on a constant-currency basis. Lorberbaum said the commercial sector continued to outperform residential across regions, while new home construction remained soft and consumers continued to defer purchases and remodeling amid uncertainty.

Chief Financial Officer Nick Manthey said gross margin was 23.5% as reported and 24.8% on an adjusted basis, up 70 basis points year over year. He said restructuring and productivity initiatives provided $32 million of benefit and favorable foreign exchange added $20 million, offsetting $28 million of increased input costs. SG&A was 19.4% of sales as reported (19.3% excluding charges), and operating income was $112 million, or 4.1% of sales. Adjusted operating income was $149 million, or 5.5% of sales, reflecting $38 million of non-recurring charges primarily tied to restructuring actions initiated last year.

Segment performance: commercial strength, residential weakness

In Global Ceramic, Manthey reported sales just under $1.1 billion, up 10.4% as reported and flat on a constant basis. He said the business delivered positive price mix driven by strength in the commercial channel and continued success in countertops, offset by lower residential volumes. Adjusted operating income was $55 million (5% of sales).

Flooring North America posted net sales of $880 million, up 2% as reported but down 4.1% on a constant basis. Manthey said sales were pressured by slower conditions in new residential construction and remodeling, along with channel inventory reductions. Adjusted operating income was $35 million (4% of sales), improving 100 basis points year over year largely due to lapping the $30 million impact of last year’s system conversion.

Flooring Rest of the World generated $751 million in sales, up 12.2% as reported but down 4.4% on a constant basis. Manthey said lower residential remodeling volumes weighed on flooring categories, partially offset by volume growth in panels and insulation. Adjusted operating income was $74 million (9.8% of sales). He also noted the segment experienced a positive input-cost comparison in Q1, but anticipated inflation in Europe would begin in Q2 and ramp in the second half due to rising natural gas and oil prices following the conflict.

Middle East conflict drives volatility in costs and pricing actions

Lorberbaum said the conflict intensified at the end of February, increasing volatility in global energy markets and lifting gasoline and diesel prices, which he said are contributing to a more cautious consumer outlook. He added that energy prices and oil and natural gas derivatives also affect the cost of many Mohawk products, and warned the full impact is unpredictable.

Management said Europe is likely to be more affected due to reliance on oil and gas from the region. Lorberbaum said Mohawk has made forward purchases to limit exposure, while Manthey and Lorberbaum both emphasized the company expects higher raw material costs to have a greater impact in the second half as inventory costs flow through.

On pricing, Lorberbaum told analysts the company has “announced increases across the businesses, generally in the mid to high single digits, with significant variation by both product and geographies.” He also cautioned that imported products with long supply chains could see a lag in price realization. Manthey said the company’s intent is to pass through higher costs and that Mohawk will “adjust as necessary as the environment evolves,” noting inflation is changing daily and weekly.

Executives also addressed how inflation varies by category, citing energy-intensive products such as carpet, LVT, and insulation as tied to oil and gas trends, while ceramic is heavily influenced by natural gas and transportation costs. In response to a question about where inflation is most pronounced, Lorberbaum pointed to the company’s polyurethane insulation business in Europe and said there are shortages in the marketplace alongside “really significant increases” being implemented.

Operational updates: new products, supply-chain adjustments, and commercial focus

President and COO Paul De Cock said Global Ceramic improved sales and profitability year over year through new styles and sizes that raised average price and distribution, with premium collections and advanced technologies improving mix. In the U.S., he cited stronger commercial sales and increased retail partnerships offsetting weakness in the builder channel, and said the company announced price increases on ceramic tile and quartz countertops to address higher material and transportation costs.

De Cock said Mohawk’s quartz countertop volumes are growing as it ramps new production and introduces higher-value products, and noted the U.S. International Trade Commission ruled that imported quartz countertops are harming domestic production, with the commission now determining tariffs and quotas.

In Flooring Rest of the World, De Cock said results were driven by productivity, cost improvements, and additional days in the period. He said European consumer confidence declined following the start of the war as fuel and energy costs rose, prompting price increases. He also highlighted product and operational actions across the portfolio, including updated LVT designs, expanded retail distribution, improvements in tiles with premium products and price increases, progress at a new MDF recycling plant, and insulation cost improvements through reengineering and sales growth in Germany and Eastern Europe to support a Poland facility startup. He added that sheet vinyl sales to the Middle East were disrupted, though alternative transport options are improving shipments.

In Flooring North America, De Cock said market conditions remained slow due to lower remodeling and new construction activity and channel inventory reductions. He said restructuring, system improvements, and additional days helped results, while inflation and lower volume were headwinds. He also noted rising mortgage rates in March contributed to slower new home sales and declining builder sentiment, though Mohawk increased its presence among top national and regional builders.

Capital allocation, balance sheet, and second-quarter outlook

Mohawk repurchased 607,000 shares for $64 million during the quarter, according to Lorberbaum. Manthey said cash and equivalents ended the quarter at $872 million, with free cash flow of $8 million, consistent with seasonal trends. Inventory was just under $2.7 billion, up less than 1% sequentially due to inflation. The company spent $102 million in CapEx in the quarter and plans about $480 million of investment in 2026 focused on cost reduction initiatives, product innovation, and maintenance.

Manthey described the balance sheet as “in a very strong position,” citing net debt of $1.2 billion and a net debt to EBITDA ratio of 0.9%.

Looking ahead, Lorberbaum said that about one month into the second quarter, the company continues to adapt to changes from the Middle East conflict and has announced price increases across much of its portfolio. He also said the order backlog has continued to grow, though he acknowledged it is difficult to separate underlying demand trends from customer inventory movements and any pull-forward from price increases.

For the second quarter of 2026, management guided to adjusted EPS of $2.50 to $2.60, excluding restructuring or other one-time charges. Lorberbaum said the outlook assumes one less shipping day in the quarter and reflects uncertainty around the duration of disruptions and inflationary pressure. Manthey added that Mohawk is assuming present demand trends continue through Q2 with limited impact from the conflict, while cost inflation begins in Q2 and ramps into the back half of the year.

In closing remarks, Lorberbaum said Mohawk has navigated global turmoil before and expects an eventual recovery, adding that when the industry rebounds, “pricing and margins increase” and the company expects leverage from its cost structure and actions taken in recent years.

About Mohawk Industries NYSE: MHK

Mohawk Industries, Inc is a global flooring manufacturer that designs, produces and distributes a broad range of floor covering products for both residential and commercial applications. Headquartered in Calhoun, Georgia, the company traces its roots to 1878 and has expanded through a series of strategic acquisitions and organic growth initiatives. Over the decades, Mohawk has built a vertically integrated platform encompassing yarn manufacturing, fiber production, wood and laminate finishing, and ceramic tile fabrication, enabling tight control over product quality and supply chain efficiency.

The company's product portfolio includes residential and commercial carpet, ceramic and porcelain tile, laminate, wood and natural stone flooring, luxury vinyl, and innovative surface solutions.

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