Roll Out the Green Carpet! by Tom Sullivan
Summary: Carpet and flooring manufacturer Mohawk Industries (NYSE:MHK) has been punished by the housing slump fallout and summertime energy prices spikes, as oil is a critical component in manufacturing polyurethane carpet bases. With a $5.8 billion market cap, a low 14 P/E and 27% of the $13.9b U.S. market, MHK's shares are finally recovering from July's $62.80 low to $85.80 on Friday. SunTrust Robinson Humphrey's Keith Hughes says MHK will show $7.25/share earnings, where even $6/share and a 15 P/E will send shares to $90. Ariel Capital forecasts $120, because of 1) Optimism that the housing slump is over. 2) Oil's price retreat means profits will improve. 3) Industry rival Shaw is owned by Berkshire Hathaway (NYSE:BHK) and so inaccessible to investors. 4) A stable, long-standing, financially conservative and investor-friendly management. 5) MHK's a possible LBO target with an $800 million cash flow. Barron's Bottom Line: Mohawk could ride over $100/share on a housing recovery.
Related Links: Barron's: Time to Buy Housing Stocks; Mohawk Industries: Strong Growth, But Competes With Buffett