Back to top

Analyst Blog

Zacks Equity Research

Risk-Reward Balanced at Masco

MAS PGTI

 ZacksTrade Now

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

On Sep 18, we maintained a Neutral recommendation on Masco Corporation (MAS - Analyst Report) despite solid second-quarter 2013 results as we await substantial improvement in big ticket remodeling and the Cabinet segment.

Why the Neutral Recommendation?

Masco’s second-quarter 2013 (results announced on Jul 29) adjusted earnings of 23 cents per share surpassed the Zacks Consensus Estimate of 19 cents by 21.1%. Earnings improved 109.1% year over year driven by new products, strong performance in North America, solid margin expansion, the company’s turnaround efforts and profit improvement initiatives.

Masco’s net sales also surpassed the Zacks Consensus Estimate by 2.4%. Revenues rose 10.5% year over year driven by strong volume growth. Volumes benefited from new product and program launches and increase in new home construction activity in the U.S. Revenue growth was supported by robust top-line increase in all the segments. Consolidated margins also improved in the quarter driven by cost controls and better operating leverage. Most encouragingly, both Installation and Cabinetry segments returned to profitability in the quarter after underperforming in 2012.

Estimates were mostly revised upwards following the solid second-quarter results. The Zacks Consensus Estimate for 2013 was increased by around 10% while that for 2014 moved up approximately 9% over the past 60 days.

Overall, we have faith in Masco’s long-term fundamentals and are encouraged by its continued focus on product innovation and cost improvements. The company is also divesting its less-profitable and underperforming assets to focus more on its core areas.

However, the housing downturn and overall economic recession in the past 4–5 years significantly hurt consumer spending on home improvement, especially large kitchen and bathroom remodeling. Though some improving trends are being seen in repair/remodeling spending, we prefer to wait until we see a substantial resumption in spending for home improvements, especially for large-projects.

Moreover, Masco’s Cabinet business has been soft for some time mainly because of the slowdown in consumer spending for big ticket remodeling. The Eurozone crisis also remains a persistent overhang. Though improving trends have been noticed, we await more substantial improvement in the cabinetry business and in Europe.

Other Stocks to Consider

Masco carries a Zacks Rank #2 (Buy). Other stocks in the building/construction industry that are currently doing well include CaesarStone Sdot-Yam Ltd. , PGT, Inc.  (PGTI - Snapshot Report) and Drew Industries Inc. . While CSTE carries a Zacks Rank #1 (Strong Buy), DW and PGTI carry a Zacks Rank #2 (Buy).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GRP IN DXYN 15.84 +7.90%
BOFI HLDG IN BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%