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Will Masco (MAS) Disappoint Investors this Earnings Season?

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Masco Corporation (MAS - Free Report) is slated to release its fourth-quarter 2016 financial numbers on Feb 9.

In the last reported quarter, the company posted a negative 6.8% surprise. Notably, the company has surpassed the Zacks Consensus Estimate in three of the last four quarters, with an average earnings beat of 10.6%.

Let’s see how things are shaping up prior to this announcement.

Factors to be Consider

Masco’s third-quarter 2016 results were marked by significant year-over-year growth in earnings, revenues and margins as the company capitalized on the improving momentum in the repair and remodeling and new home construction industry. This trend is expected to continue in the soon-to-be reported quarter.

Again, adverse currency translations, despite being moderate than 2015 levels, remain a headwind. About 21% of Masco’s sales are generated outside the U.S. As such the company is subjected to adverse currency translation across the globe. This may hurt Masco’s international sales in the soon-to-be reported quarter.

In the third quarter of 2016 earnings call, the company announced that it expects to incur an additional $15 million to $20 million of promotion and advertising expenses in the fourth quarter. Also, it expects to incur $5 million of product launch costs in the fourth quarter.

Meanwhile, for the fourth quarter, the Zacks Consensus Estimate for earnings is pegged at 34 cents a share, reflecting an increase of 18.9% year over year, while the consensus for revenues is at $1.7 billion, implying 1.9% year-over-year growth.

Earnings Whispers

Our proven model does not conclusively show that Masco is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Masco Corporation Price and EPS Surprise

 

Zacks ESP: Earnings ESP for Masco is -5.88% as the Most Accurate estimate is pegged at 32 cents while the consensus estimate is higher at 34 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter..

Zacks Rank: Masco has a Zacks Rank #4 (Sell). Please note that we caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider
    
Here are some companies in the broader construction sector that can be considered as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Summit Materials, Inc. (SUM - Free Report) , with an Earnings ESP of +4.35% and a Zacks Rank #3, is expected to release its quarterly results on Feb 9.

Century Communities, Inc. (CCS - Free Report) , with an Earnings ESP of +14.93% and a Zacks Rank #2, is expected to release its quarterly results on Feb 14. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lyon William Homes , with an Earnings ESP of +1.52% and a Zacks Rank #2, is expected to release its quarterly results on Feb 22.

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