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Analyst Blog

Shares of  Masco Corporation (MAS - Analyst Report) reached a 52-week high of $22.23 on Tuesday, May 14, 2013 gaining momentum from the improving sales trends in North America as new home construction activity recovers steadily. The closing price of the shares of this home improvement and building products company on May 14 was $22.17, yielding a superb year-to-date return of 30.4%.

Share Price Drivers

Though Masco’s first-quarter revenues and earnings (announced on Apr 30) missed the Zacks Consensus Estimate, both grew year-over-year driven by strong performance in North America, the company’s turnaround efforts and profit improvement initiatives. North American sales increased 6% year over year on the back of increasing new home construction activity, which is driving demand for Masco’s home improvement products. Further, new product launches also boosted sales.

Most encouragingly, the company’s cabinetry business, which until now was sluggish, achieved break-even operating profit in the quarter with the North American cabinetry business showing profits. Also, consolidated operating margins increased in the quarter on the back of volume growth and cost savings from Masco’s strategic initiatives.

Masco undertook several strategic initiatives to strengthen its business. The initiatives include improvement of underperforming businesses like Installation and Cabinet; leveraging its brands, new product introduction and product innovation, and efforts to reduce costs and strengthen its balance sheet.

The robust quarterly results led to an upward bias in estimate revisions. In fact, the Zacks Consensus Estimate for 2013 and 2014 increased a respective 3.0% and 2.0% to 68 cents and $1.03 per share over the last 30 days.

Other Stocks to Consider

Other stocks in the homebuilding sector that are performing well and deserve a mention include Ryland Group Inc. (RYL - Snapshot Report), Meritage Homes Corporation (MTH - Snapshot Report) and D.R. Horton, Inc. (DHI - Analyst Report), all carrying a Zacks Rank #1 (Strong Buy).

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