Interface Inc

Interface, Inc. is targeting growth in the commercial flooring market through its One Interface global operating model, focused product portfolio, and emphasis on design, performance, and sustainability, according to CFO Bruce Hausmann at an investor conference. The company, which serves more than 100 countries and generates about $1.4 billion in annual revenue, with 98% from commercial customers, estimates its addressable commercial flooring market at more than $9 billion, a portion of the global industry estimated at about $39 billion. Hausmann said Interface is gaining share in corporate office, healthcare, and education, particularly in Class A properties and facilities undergoing refresh projects, and is investing $25 million to support growth while expanding margins through manufacturing and operating efficiencies. With net debt at just 0.5 times EBITDA, management says it can balance reinvestment, selective acquisitions, dividends, and share repurchases.

Interface reported second-quarter results that beat expectations on nearly every line, though one detail complicates the picture. Net sales climbed to $395.7 million, up 5.4% as reported, while adjusted EPS jumped 47% to $0.88. Backlog was up 22% year-to-date. A closer look at the results shows that not all of this quarter's profit came from operational improvement.

Interface shares jumped 21.9% over the past month, outpacing the broader market, while Macy’s and Carrier Global also posted double-digit gains but face structural headwinds. Interface’s earnings per share grew 33.7% annually over the last two years, its free cash flow margin expanded by 7.2 percentage points in five years, and returns on capital are rising. In contrast, Macy’s earnings per share contracted 17.8% annually over three years amid store closures and weak same-store sales, and Carrier Global’s earnings per share fell 6% annually over two years even as revenue grew, with eroding returns on capital. Interface trades at $35.68 per share, or 1.5 times trailing sales, while Macy’s is at $24.45 with an 11.8 times forward P/E and Carrier Global at $73.54 with a 26.3 times forward P/E.

Interface shares rallied 5.3% in the last trading session to close at $32.56, driven by notable volume and a favorable macroeconomic backdrop. The commercial flooring company benefited from easing oil price and inflation concerns tied to an interim United States-Iran peace agreement, as well as a decline in mortgage rates to 6.47% from 6.52% for the week ending June 18, per Freddie Mac, and the Federal Reserve's stable stance on keeping rates between 3.5% and 3.75%. Interface is expected to report quarterly earnings of $0.63 per share, a 5% year-over-year increase, on revenues of $390 million, up 3.9%. The stock carries a Zacks Rank of 2, or Buy, while peer Mohawk Industries finished 3.9% higher at $112.30 and holds a Zacks Rank of 4, or Sell.