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Why Is Masco (MAS) Down 6.9% Since Last Earnings Report?

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A month has gone by since the last earnings report for Masco (MAS - Free Report) . Shares have lost about 6.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Masco due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Masco Q1 Earnings & Sales Top Estimates

Masco Corporation reported impressive results for first-quarter 2021. Both earnings and revenues surpassed the Zacks Consensus Estimate as well as improved year over year. Strong Decorative Architectural Products and North American Plumbing segments helped it deliver better-than-expected results.

“Our markets remain strong, and we continue to demonstrate our ability to execute extremely well in this dynamic environment. We have taken actions and developed further plans to offset the raw material and logistics inflation that we are experiencing. While we anticipate these challenges will continue for the next few quarters, we believe we are well prepared and will continue to adjust to deliver value for our customers and our shareholders.” said Masco President and CEO, Keith Allman.

Inside the Headlines

Masco reported adjusted earnings of 89 cents per share, which topped the consensus mark of 66 cents by 34.9%. Its bottom line grew an impressive 89.3% from year-ago figure of 46 cents per share.

Net sales of $1,970 million topped the consensus estimate of $1,827.3 million by 7.8%. On a year-over-year basis, the top line increased 24.6%. Notably, net sales jumped 22% year over year in local currency. In local currency, sales in the North American region increased 21% from prior-year figure and 27% internationally.

Segmental Analysis

Plumbing Products: Sales in the segment rose 31% year over year to $1,249 million. In local currency, the segment’s sales (excluding acquisitions) increased 22% year over year. Adjusted operating margin expanded 370 basis points (bps) year over year to 20.3%. Adjusted EBITDA increased 55.9% year over year to $279 million.

Decorative Architectural Products: The segment reported sales of $721 million, up 15% from the prior-year period. Adjusted operating margin expanded 440 bps to 19.7%. Adjusted EBITDA also improved 42.1% from the prior-year period to $152 million.

Margins Performance

Adjusted gross margin came in at 35.6%, which expanded 80 bps from the prior year. Selling, general and administrative expenses — as a percentage of net sales — were down 340 bps from the year-ago figure.

Adjusted operating margin expanded 420 bps on a year-over-year basis to 18.6%. Adjusted EBITDA also increased 56.7% year over year to $409 million.

Financials

At quarter-end, the company had cash and cash investments of $838 million compared with $1,326 million recorded at 2020-end. Long-term debt was $2.96 billion, up from $2.79 billion at 2020-end. Net cash for operating activities was $89 million for the first three months of 2021 compared with $92 million in the comparable year-ago period.

It repurchased 5.5 million shares for approximately $303 million during the quarter.

Lifted 2021 Projections

The company expects earnings for 2021 in the range of $1.52-$1.72 per share, as reported. Adjusted earnings are now projected within $3.50-$3.70 per share, up from prior expectation of $3.25-$3.45. In 2020, adjusted earnings were $3.12 per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Masco has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Masco has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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