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Masco (MAS) Tops on Q2 Earnings, Sales Match Estimates
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Masco Corporation’s (MAS - Free Report) second quarter of 2016 results were marked by significant year-over-year growth in earnings, revenues and margin, as the company capitalized on improving momentum in the repair and remodeling and new home construction industry. In addition, management revealed its intention to raise its annual dividend by 2 cents per share to 40 cents per share, effective from the fourth quarter of 2016.
Adjusted earnings of 46 cents per share in the second quarter of 2016 beat the Zacks Consensus Estimate of 42 cents by 9.5%. Moreover, adjusted earnings increased 21% year over year driven by strong margins, and an improved selling, general and administrative expense ratio.
Masco’s net sales of $2.001 billion were in line with the Zacks Consensus Estimate. Net sales were up 4% from the prior-year quarter owing to sales growth across most segments except Cabinet.
In local currency, North American sales increased 3% year over year to $1.60 billion driven by growing demand for repair and remodeling and new home construction products in an improving U.S. economy.
International sales rose 7% (up 9% in local currency) to $403 million.
Margins
Adjusted gross profit grew 10.7% to $705 million. Adjusted gross margin improved 220 basis points (bps) to 35.2%.
Adjusted operating profit was $342 million, up 22% from the prior-year quarter. Adjusted operating margin increased 260 bps to 17.1% driven by increased operating leverage and solid cost control. Adjusted operating margin increased 230 bps in North America to 19.0% and 290 bps in international markets to 15.4%. As a percentage of net sales, selling, general and administrative expenses improved 40 bps to 18.1%.
Segmental Analysis
Cabinets and Related Products: Segment revenues of $261 million declined 3% year over year as strong retail sales were completely offset by the exit of some less profitable direct-to-builder business.
The company reported 146.7% increase in adjusted operating profit of $37 million driven by higher operating efficiencies, and a favorable mix. Adjusted operating margin was 14.2% in the quarter, up 860 bps from year ago quarter.
Plumbing Products: The segment recorded revenues of $923 million, up 9%. Organic revenues increased 10% driven by growth in the wholesale and retail channels.
Adjusted operating margin of 20.8% increased 450 bps year over year. North American sales of the segment increased 9%. International sales increased 11% in local currency.
Decorative Architectural Products: Segment revenues of $620 million were almost flat year over year as strong demand in paints, coating products and Builder’s Hardware, was offset by the timing and amount of promotion.
Operating margin increased 100 bps to 22.4% driven by volume increase and lean initiatives.
Windows and Other Specialty Products: Segment revenues were $197 million, up 3% year over year driven by a positive mix and favorable pricing. Organic revenues increased 4%, owing to strong performance of the North American windows business.
Masco expects stronger demand for its leading products in 2016.
The company currently carries a Zacks Rank #3 (Hold).
Key Picks from the Sector
Some stocks worth considering in the construction sector include NCI Building Systems Inc. , Owens Corning (OC - Free Report) and Gibraltar Industries, Inc. (ROCK - Free Report) . All the three companies sport a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>
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Masco (MAS) Tops on Q2 Earnings, Sales Match Estimates
Masco Corporation’s (MAS - Free Report) second quarter of 2016 results were marked by significant year-over-year growth in earnings, revenues and margin, as the company capitalized on improving momentum in the repair and remodeling and new home construction industry. In addition, management revealed its intention to raise its annual dividend by 2 cents per share to 40 cents per share, effective from the fourth quarter of 2016.
Adjusted earnings of 46 cents per share in the second quarter of 2016 beat the Zacks Consensus Estimate of 42 cents by 9.5%. Moreover, adjusted earnings increased 21% year over year driven by strong margins, and an improved selling, general and administrative expense ratio.
Masco’s net sales of $2.001 billion were in line with the Zacks Consensus Estimate. Net sales were up 4% from the prior-year quarter owing to sales growth across most segments except Cabinet.
In local currency, North American sales increased 3% year over year to $1.60 billion driven by growing demand for repair and remodeling and new home construction products in an improving U.S. economy.
International sales rose 7% (up 9% in local currency) to $403 million.
Margins
Adjusted gross profit grew 10.7% to $705 million. Adjusted gross margin improved 220 basis points (bps) to 35.2%.
Adjusted operating profit was $342 million, up 22% from the prior-year quarter. Adjusted operating margin increased 260 bps to 17.1% driven by increased operating leverage and solid cost control. Adjusted operating margin increased 230 bps in North America to 19.0% and 290 bps in international markets to 15.4%. As a percentage of net sales, selling, general and administrative expenses improved 40 bps to 18.1%.
Segmental Analysis
Cabinets and Related Products: Segment revenues of $261 million declined 3% year over year as strong retail sales were completely offset by the exit of some less profitable direct-to-builder business.
The company reported 146.7% increase in adjusted operating profit of $37 million driven by higher operating efficiencies, and a favorable mix. Adjusted operating margin was 14.2% in the quarter, up 860 bps from year ago quarter.
Plumbing Products: The segment recorded revenues of $923 million, up 9%. Organic revenues increased 10% driven by growth in the wholesale and retail channels.
Adjusted operating margin of 20.8% increased 450 bps year over year. North American sales of the segment increased 9%. International sales increased 11% in local currency.
Decorative Architectural Products: Segment revenues of $620 million were almost flat year over year as strong demand in paints, coating products and Builder’s Hardware, was offset by the timing and amount of promotion.
Operating margin increased 100 bps to 22.4% driven by volume increase and lean initiatives.
Windows and Other Specialty Products: Segment revenues were $197 million, up 3% year over year driven by a positive mix and favorable pricing. Organic revenues increased 4%, owing to strong performance of the North American windows business.
MASCO Price, Consensus and EPS Surprise
MASCO Price, Consensus and EPS Surprise | MASCO Quote
Outlook
Masco expects stronger demand for its leading products in 2016.
The company currently carries a Zacks Rank #3 (Hold).
Key Picks from the Sector
Some stocks worth considering in the construction sector include NCI Building Systems Inc. , Owens Corning (OC - Free Report) and Gibraltar Industries, Inc. (ROCK - Free Report) . All the three companies sport a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>