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Masco (MAS) Q4 Earnings & Revenues Top Estimates, Rise Y/Y

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Masco Corporation (MAS - Free Report) reported impressive fourth-quarter 2020 results, with the top and the bottom line beating the Zacks Consensus Estimate and increasing year over year. Notably, sturdy performance in the Plumbing Products and Decorative Architectural Products segments led to better-than-expected results.

However, following the earnings release, shares of the company slipped 1.8% during pre-market trading hours on Feb 9.

Inside the Headlines

During the fourth quarter, Masco reported adjusted earnings of 75 cents per share that came ahead of the Zacks Consensus Estimate of 74 cents and surged 36.4% year over year. Notably, this was the fifth straight quarter of positive earnings surprise.

Masco Corporation Price, Consensus and EPS Surprise

 

Masco Corporation Price, Consensus and EPS Surprise

Masco Corporation price-consensus-eps-surprise-chart | Masco Corporation Quote

 

Net sales of $1,860 million topped the consensus estimate of $1,808 million, thus marking the fourth successive beat. Markedly, the top line registered an increase of 13% on a year-over-year basis. In local currency, net sales rose 12% year over year.

We note that net sales in the North American region increased 13% year over year to $1,468 million, while internationally the metric jumped 14% year over year to $392 million. In local currency, international sales rose 8% year over year.

Segment Analysis

Plumbing Products: During the fourth quarter, sales in the segment increased 14% year over year to $1,172 million. Excluding the impact of foreign currency, the segment’s sales rose 12%. Adjusted operating profit rallied 24.4% to $224 million, while adjusted operating margin expanded 160 basis points (bps) year over year to 19.1%. Adjusted EBITDA increased 22.4% year over year to $246 million.

Decorative Architectural Products: The segment generated sales of $688 million, up 12% from the prior-year quarter’s levels. Adjusted operating profit increased 9% year over year to $109 million. However, adjusted operating margin fell 50 bps year over year to 15.8%. Adjusted EBITDA rose 8.2% year over year to $119 million.

Margins Performance

Impressively, adjusted gross margin increased 100 bps to 35.6%. Also, adjusted operating margin expanded 90 basis points year over year to 16.6%.

Adjusted selling, general and administrative expenses — as a percentage of net sales — rose 10 bps year over year to 19%. We note that adjusted EBITDA also rose 18.3% year over year to $343 million.

Other Financials

Masco exited the fourth quarter with cash and cash investments of $1,326 million, long-term debt of $2,792 million and equity of $421 million. As of Dec 31, 2020, it had full availability of the $1-billion revolving credit facility.

For the year ended Dec 31, 2020, net cash from operating activities came in at $953 million compared with $833 million in 2019.

During the quarter, Masco’s board of directors announced its intention to raise the company’s annual dividend to 94 cents per share (up 68%) from 56 cents per share. The change is likely to be incorporated from second-quarter 2021. The board also approved a new $2-billion share repurchase authorization effective Feb10, 2021.

2020 Highlights

Net revenues in 2020 came in at $7,188 million compared with $6,707 million in 2019.

Selling, general and administrative expenses in 2020 came in at $1,292 million compared with $1,274 million in 2019.

Adjusted operating profit in 2020 came in at $1,306 million compared with $1,110 million in 2019.

2021 Outlook

For 2021, the company expects adjusted earnings per share (EPS) between $3.25 and $3.45.

Zacks Rank & Key Picks

Masco currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some other better-ranked stocks in the same space include Construction Partners, Inc. (ROAD - Free Report) , Quanex Building Products Corporation (NX - Free Report) and Gibraltar Industries, Inc. (ROCK - Free Report) . Construction Partners and Quanex sport a Zacks Rank #1, while Gibraltar carries a Zacks Rank #2 (Buy).

Construction Partners has a three-five year EPS growth rate of 12.2%.

Earnings for Quanex are expected to rise 11.3%, in 2021.

Gibraltar has a trailing four-quarter earnings surprise of 37%, on average.

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