Roll Out the Green Carpet! by Tom Sullivan
Summary: Carpet and flooring manufacturer Mohawk Industries (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 (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