Mohawk Q2 2026 earnings: Profit rises with tariff refund support

Mohawk Industries (NYSE: MHK) reported Q2 2026 net sales of $2.99 billion, up 6.8% from $2.80 billion, while diluted EPS rose to $3.22 from $2.34. Adjusted EPS reached $3.67, including an approximately $0.63 benefit from tariff refunds, and free cash flow increased to $228.2 million. Volume, pricing, product mix and productivity supported the quarter despite continued weakness in residential flooring markets.

Core earnings results

Net sales increased 5.0% on Mohawk’s adjusted basis, which accounts for differences in shipping days and foreign exchange rates. Management attributed the growth to higher volume, pricing and an improved product mix, although some volume came from initial stocking for new product placements and limited customer purchases ahead of announced price increases.

Profit grew faster than revenue. Adjusted gross margin rose to 27.4% from 26.4%, while adjusted selling, general and administrative expenses declined to 17.7% of sales from 18.5%. Together, these changes lifted adjusted operating margin to 9.7% from 8.0%.

The quarter ended July 4, 2026, and the results were released on July 31, 2026. Adjusted figures exclude specified restructuring and other items and should be considered separately from GAAP results.

Business and segment performance

Global Ceramic and Flooring Rest of World produced adjusted sales growth, while Flooring North America declined after adjusting for shipping days. Even with that adjusted sales contraction, North American adjusted operating margin improved substantially from the prior year.

Global Ceramic benefited from productivity and better pricing and mix, partly offset by higher input costs. In Flooring North America, productivity helped offset input-cost pressure, while adjusted operating income rose to $111.3 million from $69.2 million despite lower adjusted sales. Flooring Rest of World benefited from year-over-year pricing and delivered the strongest adjusted margin among the three segments.

Commercial flooring continued to outperform residential channels. Mohawk said used-home sales remained constrained by affordability and new-home construction stayed under pressure, but the company believed it gained market share in most regions through new collections, expanded product placements and an improved mix.

Profitability, cash flow and the balance sheet

Operating cash flow increased to $316.5 million, while capital expenditures were $88.3 million, producing $228.2 million in free cash flow. The cash improvement provided support for approximately $60 million of share repurchases covering more than 600,000 shares during the quarter.

Mohawk ended the quarter with $849.6 million of cash and $1.92 billion of total debt. Net debt was $1.07 billion, equivalent to 0.8 times trailing adjusted EBITDA. Inventory declined to $2.59 billion from $2.66 billion at the end of 2025, while total debt fell by approximately $114 million over the same period.

The company also started projects involving operational simplification, organizational realignment, warehouse consolidation and capacity optimization. These initiatives are expected to reduce costs by approximately $60 million, with most work completed by the end of 2027, and will require about $50 million of cash restructuring costs and capital expenditures.

Tariff refunds boosted Q2 EPS as input costs continued to rise

Both reported and adjusted Q2 EPS included an approximately $0.63 benefit from tariff refunds that had not been included in the company’s Q2 guidance. Mohawk described the refunds as reversals of tariff costs it had previously absorbed, meaning the year-over-year earnings increase was not driven entirely by current-period operating improvements.

At the same time, the company is facing higher labor, overhead, material, energy and transportation expenses. Management expects more of these costs to move through inventory and affect margins during the second half of 2026. Mohawk has implemented price increases and said additional pricing actions could be necessary if elevated costs persist.

Q3 2026 guidance

Mohawk expects flooring market conditions to remain difficult in the third quarter, with commercial activity continuing to outperform residential demand. Sales are expected to decline seasonally from Q2 after excluding currency and shipping-day effects, and management cautioned that the drop could be more pronounced than in recent years because of the stronger Q2 result.

The company expects higher input costs, additional benefits from price increases and continued productivity gains during Q3. Cost pressure is also expected to continue into Q4.

Cost actions and leadership transition

Paul De Cock, Mohawk’s president and chief operating officer, will become CEO on September 30, 2026. Jeff Lorberbaum will retire as CEO but remain chairman of the board. The transition comes as the company pursues further cost reductions while managing weak residential demand and inflation across several input categories.

Recent insider transactions

The supplied six-month aggregate shows 86,460 shares purchased across 12 transactions and 71,536 shares sold across 12 transactions, resulting in net purchases of 14,924 shares. Total insider holdings were listed at approximately 12.2 million shares. The latest individual reports, however, were concentrated in sales and two stock awards with reported values of zero.

These reported transactions do not by themselves establish the insiders’ views on Mohawk’s outlook.

Risks investors need to watch

• Residential demand remains weak. Used-home sales remain near multidecade lows and new-home construction is under pressure, limiting an important source of flooring demand.
• Input costs could outpace pricing. Higher labor, materials, energy, freight and overhead costs are moving through inventory and could pressure margins if price increases or productivity gains do not keep pace.
• Some Q2 volume may not repeat. Initial stocking for new product placements and limited customer purchases ahead of price increases contributed to the quarter, potentially making the expected Q3 seasonal decline more pronounced.
• Tariff-refund benefits are set to decline. Q2 EPS included approximately $0.63 per share of refunds, compared with about $0.12 included in Q3 guidance, creating a tougher sequential earnings comparison.
• North American underlying sales remain pressured. Flooring North America sales declined 4.7% on an adjusted basis even though reported sales increased.

Summary

Mohawk’s Q2 2026 results combined reported and adjusted sales growth, broader margin expansion and substantially higher free cash flow despite continued residential-market weakness. Pricing, mix, productivity and segment margin gains supported earnings, but tariff refunds also provided a meaningful EPS benefit. The next points to monitor are the expected Q3 sales decline, the flow-through of higher input costs, the effectiveness of further pricing actions and progress on the company’s new cost-reduction program.

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