Analyst Updates Outlook for Four Major Firms

New York, NY, Feb. 3, 2012 -- Flooring industry analyst Stifel Nicolaus has buy ratings on stock of Armstrong and Lumber Liquidators, and hold ratings on Mohawk and Interface.

The firm recently issued an update on its outlook for the four major flooring companies this year.

Armstrong

Stifel Nicolaus said that resilient flooring margins were squeezed in 2011 from rising raw materials costs but price increases last year and this week should help.

"Demand for resilient flooring in 2012 domestically should be up as LVT products gain share and apartment building rebounds. International demands look weak. We believe the wood flooring business will be strong as Armstrong's improved position in the home centers should help volumes and recent cost reductions in lumber benefit margins."

Interface

"We believe one third of Interface’s U.S. business will be under some pressure with weakness pronounced in the financial institutions end market, GSA pressures, and Constraints on K-12 education spending," Stifel Nicolaus said.

"Higher education spending should remain fairly healthy. Europe represents 30% of consolidated revenues business where large markets in the U.K. and a growing presence in Germany have likely seen some macro deterioration.

Mohawk

"Mohawk’s carpet business is seeing huge benefits from new fiber Triexta (sold under the DuPont name as Smartstrand) and a greatly improved market share position with home center channels," the analyst said.

"The new fiber has been a big hit with dealers and consumers. A softer Smartstrand Silk product is being launched and will likely be meaningful to 2012 performance.

"In Dal-Tile, we believe the ceramic division is poised for a strong 2012, where we will see good unit growth and margin expansion. In the Unilin segment, we believe that fears relating to Europe are somewhat overblown. The company is expanding in Eastern Europe and enjoys high profit streams from on-going royalties from its glue-less locking system. U.S. laminate sales will be pressured."

Lumber Liquidators

"We do not expect any rising costs of purchases coming from China (40% of total company purchases). The Sequoia acquisition and line reviews should prevent costs from rising. We are nervous about near-term store traffic and revenue trends. We are constructive about revenue performance as the year progresses as more of the cost savings can be used to stimulate sales."

Overall, Stifel Nicolaus sees industry units growing 2-4%, with revnue up 5-7%.

"This should be the best year for floor covering since 2006," Stifel Nicolaus said.

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