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Will Masco (MAS) be Able to Defeat Inflation in Q1 Earnings?

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Masco Corporation (MAS - Free Report) is scheduled to report first-quarter 2022 results on Apr 27, before the opening bell.

In the last reported quarter, the company’s earnings missed the Zacks Consensus Estimate by 5.6% and declined 10.7% year over year due to supply-chain challenges and inflation headwinds. On the contrary, net sales increased 8.7% year over year and topped the consensus mark by 2.3%, thanks to strong demand across categories and channels.

Nonetheless, earnings surpassed the consensus mark in eight of the trailing nine quarters.

The Trend in Estimate Revision

The Zacks Consensus Estimate for Masco’s first-quarter earnings is pegged at 88 cents per share, suggesting a decline of 1.1% from the year-ago quarter’s figure of 89 cents. Earnings estimates for the said period have moved down 1.1% in the past 30 days, depicting analysts’ concern over the company’s growth potential. The consensus estimate for net sales is pegged at $2.08 billion, indicating a 5.5% increase from the prior-year quarter’s figure.

Masco Corporation Price and EPS Surprise

 

Masco Corporation Price and EPS Surprise

Masco Corporation price-eps-surprise | Masco Corporation Quote

 

Factors to Note

Masco’s revenues in first-quarter 2022 are likely to improve year over year. The company has been witnessing strong performance in the Decorative Architectural Products and Plumbing Products segments. Its paint business, especially within the PRO and DIY markets, has been witnessing strong growth in the past few quarters. The same is likely to have contributed to the to-be-reported quarter’s performance.

Geographically, both North America and International markets have been riding high on solid demand from the housing industry. The company expects the North American repair and remodel market and the European market to remain robust in the first quarter. Additionally, regular acquisitions, cost control measures and significant capital deployment are expected to have contributed to first-quarter performance.

The Zacks Consensus Estimate for Plumbing Products’ sales of $1,298 million indicates a 3.9% improvement from the year-ago reported figure. The same for the Decorative Architectural Products segment’s sales is currently pegged at $781 million, calling for a 8.3% increase from the year-earlier reported number.

The bottom line is expected to have dented in the quarter to be reported, thanks to intense inflationary pressure, particularly on commodities and logistics. Although cost price neutrality is expected to have improved sequentially, inflation is likely to have increased for raw material, freight and labor. Inflation reached the low double digits in the fourth quarter of 2021.

Apart from the above-mentioned costs, MAS has been incurring expenses related to product launches and acquisitions.

The consensus mark for non-GAAP operating profit is pegged at $233 million, suggesting a decline of 7.9% from the prior-year reported figure. The same for non-GAAP operating profit is pegged at $133 million, calling for a decline of 6.3% from the year-ago quarter’s figure.

What the Zacks Model Unveils

Our proven model doesn’t not conclusively predicts an earnings beat for Masco this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Currently, MAS has a Zacks Rank #4 (Sell) and an Earnings ESP of -0.19%.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks With Favorable Combination

Here are some other companies in the Zacks Construction sector, which according to our model, have the right combination of elements to post an earnings beat in their respective quarters to be reported.

Weyerhaeuser Company (WY - Free Report) has an Earnings ESP of +3.95% and a Zacks Rank #2.

Shares of Weyerhaeuser have gained 63% over the past year. WY’s earnings topped the consensus mark twice but missed the same on two occasions, with the average being 1.6%.

KBR, Inc. (KBR - Free Report) has an Earnings ESP of +6.64% and a Zacks Rank #3.

Shares of KBR have gained 69.8% over the past year. KBR’s earnings topped the consensus mark in all the last four quarters, with the average being 10.4%.

United Rentals, Inc. (URI - Free Report) has an Earnings ESP of +10.11% and a Zacks Rank #3.

Shares of United Rentals have gained 31.1% over the past year. In the trailing four quarters, URI’s earnings topped the consensus mark twice but missed the same on the other two occasions, with the average surprise being almost 3%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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