Mohawk Industries (NYSE:MHK) reported third-quarter 2026 sales of $2.8 billion, up 1% as reported and essentially flat after adjusting for foreign exchange and an additional shipping day, as the flooring manufacturer navigated softer demand late in the quarter. CEO Paul De Cock, speaking on his first earnings call in the role, said the company’s operating performance was in line with expectations despite weakening conditions, particularly in U.S. builder markets.
Third-quarter net earnings were $163 million, or 5.9% of sales, while adjusted EBITDA was $353 million, representing a 12.7% margin. Operating income totaled $188 million, and adjusted operating income was $200 million, down $5 million from a year earlier. Earnings per share and adjusted earnings per share were both $2.72.
Volumes declined 4% during the quarter, reflecting soft market demand, while price and mix increased 4%. Chief Financial Officer Nick Manthey said $85 million of price and mix benefits and $47 million in productivity gains offset approximately $117 million of underlying input-cost inflation.
Demand Remains Uneven Across Markets
De Cock said Mohawk generates more than half of its sales in the United States, where demand weakened as the quarter ended and remained soft in October. Higher interest rates affected most products and channels, with the builder channel facing the greatest pressure.
Residential repair and remodeling activity, which Mohawk estimates accounts for about half of U.S. sales, remained restrained as consumers deferred larger projects. However, specialty retail improved sequentially and performed better than larger-format retail. Mohawk said its U.S. retail business grew during the quarter and gained share in most categories, including residential carpet, laminate, ceramic and countertops.
The company cited demand for its asthma- and allergen-friendly carpet, scratch-resistant laminate products, quartz countertop designs and accessories. De Cock said the specialty retail channel benefited from stronger demand at the higher end of the market, while home-center point-of-sale trends remained slow.
Residential new construction, which represents about one-quarter of Mohawk’s U.S. sales, continued to soften as higher mortgage rates, affordability constraints and declining builder confidence pressured single-family starts. Mohawk added builder-program wins in ceramic and laminate, though De Cock said those gains did not fully offset the market decline.
Commercial markets were more constructive than residential markets, according to the company, although new project awards slowed in August and September. Mohawk said hospitality, healthcare and education were the most active commercial segments, while return-to-office trends supported carpet-tile demand. Commercial LVT posted a sixth consecutive month of order growth.
In Europe, which represents about one-third of company sales, consumer demand and showroom traffic remained weak, while commercial projects held up better. European natural-gas prices roughly doubled from the beginning of the third quarter, prompting Mohawk to accelerate ceramic price increases and announce November price actions in its European panels and insulation businesses.
Segment Results
- Global Ceramic: Sales were $1.1 billion, up 2% as reported and slightly higher excluding currency and the extra shipping day. Adjusted operating income was $74 million, or 6.5% of sales, down 160 basis points from the prior year as higher energy and fuel costs outweighed price and productivity benefits.
- Flooring North America: Sales totaled $950 million, up 1% as reported. Excluding the benefit of an additional shipping day, sales declined less than 1%. Adjusted operating income rose to $77 million, or 8.1% of sales, supported by productivity gains, price and mix, and $10 million of tariff refunds.
- Flooring Rest of the World: Sales were $707 million, down about 1% as reported and down about 2% after currency and shipping-day adjustments. Constant-currency volumes fell about 10%, primarily because of weak demand in Europe, Australia and New Zealand. Adjusted operating income was $66 million, or 9.3% of sales, up 100 basis points year over year.
Cash Flow, Buybacks and Capital Framework
Mohawk generated $471 million in cash from operations and $390 million in free cash flow during the quarter, bringing year-to-date free cash flow to $626 million, up 78% from the prior-year period. Capital expenditures were $81 million in the quarter, and the company reduced its full-year capital expenditure expectation to approximately $445 million from $460 million previously.
The company repurchased $261 million of shares in the third quarter, more than double its repurchases in the first half of the year, reducing outstanding shares by more than 3%. Mohawk also repurchased another $34 million of shares early in the fourth quarter, completing its prior authorization. Its board approved a new $500 million share-repurchase authorization.
Manthey said Mohawk’s baseline annual capital expenditure needs are expected to be approximately $375 million, focused on maintenance, productivity initiatives and innovation. He said the company sees limited need for incremental capacity in the near term. Mohawk’s net debt leverage improved to 0.7 times at the end of the quarter, and management established a long-term target of up to 2 times net debt to adjusted EBITDA, subject to cyclical conditions and its investment-grade credit ratings.
De Cock also said the company has begun a comprehensive review of its portfolio of businesses, evaluating market attractiveness, competitive advantages, cash profitability and return on invested capital. He said Mohawk could reposition, fix or rethink businesses that fall short of expectations.
Fourth-Quarter and Early 2027 Outlook
For the fourth quarter, Mohawk expects flooring-market conditions to remain challenging and demand to be softer than in the third quarter. The quarter will have four fewer shipping days than the prior-year period, representing an approximately 6% headwind to sales, management said.
The company expects low-single-digit adjusted net sales growth year over year and adjusted earnings per share of $1.35 to $1.45. Mohawk expects year-over-year underlying inflation to remain similar to the third quarter and said it intends to offset inflation on a dollar-for-dollar basis through pricing, mix and productivity actions.
Looking ahead, management said it is planning for market volumes to decline in 2027, though it believes Mohawk can continue to outperform its markets. Cost-of-sales inflation accelerated from low-single digits in the first half of 2026 to mid-single digits in the third quarter and is expected to remain at that level in the fourth quarter and into early 2027.
De Cock outlined a four-pillar strategy centered on outperforming markets, product innovation and brand strength, profitability and operational excellence, and cash generation and capital discipline. “Our markets will recover, but we are not waiting for that recovery to act,” he said.
About Mohawk Industries (NYSE:MHK)
Mohawk Industries, Inc is a global manufacturer and distributor of flooring products. The company serves residential and commercial customers through products sold to retailers, distributors, builders, contractors and other industry professionals.
Its product portfolio includes carpet, rugs, ceramic and porcelain tile, hardwood flooring, laminate, luxury vinyl tile and other resilient flooring products. Mohawk markets products under a range of well-known brands, including Mohawk, Karastan, Pergo, Quick-Step, Marazzi, Daltile, American Olean and Durkan.
The company traces its origins to a carpet mill established in 1878 and is headquartered in Calhoun, Georgia.
