MHK – Market expectations are for Uniform ROA to remain stable, and management may be concerned about Europe, acquisitive strategy, and rising costs

• Mohawk Industries, Inc. (MHK:USA) currently trades near recent averages relative to UAFRS-based (Uniform) earnings, with a 14.3x Uniform P/E. At these levels, the market is pricing in profitability to remain stable, and management may be concerned about their European business, their acquisitions strategy, and pricing actions to counter rising costs.
• Specifically, management may lack confidence in their ability to sustain their record high adjusted EPS, strong performance in their ceramic business, and European commercial sales growth. Additionally, they may lack confidence in their ability to enter new markets through strategic acquisitions and further secure new capital investments for their production initiatives. Furthermore, management may be concerned about inflationary and labor shortage headwinds, as well as their capacity to sustain share buybacks. Moreover, they may lack confidence in their ability to aggressively implement effective pricing actions to minimize cost pressures, manage their capex spending, and successfully implement their capacity expansion program.