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Masco (MAS) Q4 Earnings Lag, Sales Top, Dividend Rises 19%

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Masco Corporation (MAS - Free Report) reported lacklustre earnings for fourth-quarter 2021. The bottom line not only lagged the Zacks Consensus Estimate but also declined on a year-over-year basis due to supply-chain challenges and inflation headwinds. Nonetheless, net sales surpassed the consensus mark and improved from the prior-year quarter’s level on strong demand.

Shares of Masco fell more than 2% in the pre-market trading session on Feb 8.

Masco’s president and CEO Keith Allman, said, “Looking ahead, we expect demand for our products to remain strong in 2022. We believe we are well positioned to outperform the market with our industry leading portfolio of branded, lower ticket, repair and remodel-oriented products that serve both the do-it-yourself and professional markets, favorable housing fundamentals, and demonstrated executional excellence. In 2022, we anticipate that we will achieve margin expansion, and expect to deliver adjusted earnings per share in the range of $4.10 to $4.30 per share.”

Impressively, Masco hiked its quarterly dividend by 19% to 28 cents, payable Mar 14, 2022, to its shareholders of record on Feb 25.

Inside the Headlines

Masco reported adjusted earnings of 67 cents per share, which missed the consensus mark of 71 cents by 5.6% and declined 10.7% from the year-ago figure of 75 cents.

Net sales of $2.02 billion topped the consensus estimate of $1.98 billion by 2.3% and increased 8.7% from the prior-year figure of $1.86 billion. Net sales jumped 7% year over year in local currency, excluding acquisitions and divestitures. Sales in the North American region increased 11% from the prior-year figure and 3% internationally, in local currency.

Segmental Analysis

Plumbing Products: Sales in the segment rose 5% year over year to $1,228 million. In local currency, the segment’s sales (excluding acquisitions and divestitures) increased 2% year over year. Yet, adjusted operating margin contracted 640 basis points (bps) year over year to 12.7%. Adjusted EBITDA decreased 26.4% year over year to $181 million.

Decorative Architectural Products: The segment reported sales of $794 million, up 15% from the prior-year period’s number and 14% excluding acquisitions. Adjusted operating margin also increased 80 bps to 16.6%. Adjusted EBITDA also rose 18.5% from the prior-year period’s reading to $141 million.

Margins Performance

Adjusted gross margin contracted 490 bps from the prior-year level to 30.7%. Selling, general and administrative expenses — as a percentage of net sales — were down 140 bps to 17.6% from the year-ago figure of 19%.

Adjusted operating margin contracted 350 bps on a year-over-year basis to 13.1%. Adjusted EBITDA also fell 12.2% year over year to $301 million.

Financials

As of Dec 31, 2021, Masco had cash and cash investments of $926 million compared with $1,326 million recorded at 2020 end. Long-term debt was $2.95 billion, up from $2.79 billion at 2020 end. Net cash for operating activities was $930 million for 2021 compared with $953 million in 2020.

2021 Highlights

Net revenues in 2021 came in at $8.38 billion, topping analysts’ expectation of $8.33 billion and rising 17% from $6,707 million in 2020. Net sales increased 13% in local currency, excluding acquisitions and divestitures. Adjusted earnings of $3.70 per share missed the consensus mark of $3.74 by 1.1% but improved 19% from the year-ago period’s figure.

Adjusted gross and operating margins contracted 190 bps and 80 bps from the 2020 figures, respectively.

2022 Projections

For 2022, adjusted earnings are projected within $4.10-$4.30 per share. This indicates 10.8-16.2% growth from the 2021 level. The Zacks Consensus Estimate for 2022 earnings is currently pegged at $4.25 per share.

Zacks Rank

Masco currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some Recent Construction Releases

D.R. Horton, Inc. (DHI - Free Report) reported impressive results for first-quarter fiscal 2022.

D.R. Horton’s quarterly earnings and revenues beat the respective Zacks Consensus Estimate and improved on a year-over-year basis. The upside indicates a robust housing market, significant market share gains, a vast geographic footprint and varied product offerings across multiple brands.

PulteGroup Inc. (PHM - Free Report) reported better-than-expected results for fourth-quarter 2021.

Both earnings and revenues for PulteGroup topped the Zacks Consensus Estimate and improved 64.1% and 36.5% year over year, respectively, on the back of a solid housing market backdrop and resilient economy.

M.D.C. Holdings, Inc.’s shares dropped nearly 9% on Feb 1, after tepid results for fourth-quarter 2021 were reported.

Both the top and the bottom line missed the respective Zacks Consensus Estimate. MDC also provided a dull guidance for first-quarter 2022 deliveries.


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