Mohawk Industries Earnings Beats Estimates On Higher Margins

Mohawk Industries MHK reported 3Q10 adj. EPS OF $0.77 vs. $0.74. Sales were light of Wells Fargo's forecast; margins were better, but one-time items helped. MHK continues to face generally soft demand conditions and a lag in passing raw mat cost increases through to customers via price; resistance at retail in the carpet segment caused lighter sales this Quarter. Wells Fargo raised 10E EPS to $2.66 from $2.60 and 11E to $2.85 from $2.60, but the valuation range remains $52-57. EPS RECAP. Sales of $1.3BB missed Wells Fargo's estimates of $1.4BB with shortfall most prevalent in the Mohawk & Unilin segments. Yr/yr OM (ex-charges) of 6.8% beat its 6.5% E slightly, with Unilin missing but DalTile beating due to insurance proceeds from a flood in MHK's Mexican tile plant. The company also received a $5.7MM customs refund which more than offset $3.3MM in restructuring charges. MHK is trading lower at $56.08