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Masco (MAS) Down 5% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Masco (MAS - Free Report) . Shares have lost about 5% 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 drivers.
Masco Q1 Earnings & Net Sales Beat Estimates
Masco Corporation reported better-than-expected results for first-quarter 2023. The and bottom line surpassed the Zacks Consensus Estimate. The company has been benefiting from strong pricing actions and operational improvements.
On the other hand, adjusted earnings and net sales declined on a year-over-year basis due to supply-chain challenges and inflation headwinds.
Masco’s president and CEO, Keith Allman, said, “While the headwinds we discussed last quarter continue, including softening demand trends, persistent inflation and tighter consumer spending, we have moved quickly to adjust our costs and successfully mitigated margin impact in the first quarter.”
Inside the Headlines
Masco reported adjusted earnings of 87 cents per share, which strongly beat the consensus mark of 65 cents by 33.9% but declined 10.3% from the year-ago figure of 97 cents.
Net sales of $1.98 billion topped the consensus estimate of $1.92 billion by 3.1% but decreased 10% from the prior-year period. Net sales fell 9% year over year in local currency. Sales in the North American region decreased 10% from the prior-year figure. Internationally, sales decreased by 9% as reported and by 3% in local currency.
Segmental Analysis
Plumbing Products: Sales in the segment fell 10% year over year to $1,222 million. In local currency, the segment’s sales (excluding acquisitions and divestitures) declined 8% year over year. Yet, the adjusted operating margin contracted 30 basis points (bps) year over year to 16.5%. Adjusted EBITDA decreased to $227 million from $252 million a year ago.
Decorative Architectural Products: The segment reported sales of $757 million, down 10% from the prior-year period’s number. Adjusted operating margin contracted 120 bps to 17.6%. Adjusted EBITDA declined to $141 million from the prior-year figure of $166 million.
Margins Performance
Adjusted gross margin improved 150 bps from the prior-year level to 33.6%. Adjusted selling, general and administrative expenses — as a percentage of net sales — were up 190 bps to 17.8% from the year-ago figure of 15.9%.
Adjusted operating margin contracted 40 bps on a year-over-year basis to 15.8% due to lower volumes, foreign currency and higher operational costs. Adjusted EBITDA also fell 11% year over year to $347 million.
Financials
As of Mar 31, 2023, Masco had total liquidity of $1.3 billion versus $1.45 billion in 2022 and $1.22 billion at March 2022-end. This includes cash and cash investments of $510 million compared with $452 million recorded at 2022-end. Long-term debt was $2.95 billion, flat from 2022-end. Net cash to operating activities was $33 million for the first quarter versus net cash for operating activities of $227 million in the prior-year period.
During the reported period, the company repurchased 1.1 million shares for $56 million.
2023 Guidance Maintained
Adjusted earnings are projected within $3.10-$3.40 per share. This indicates a decline from the 2022 level of $3.77 per share. Net sales are likely to decrease 10% in 2023, with Plumbing Products falling 10-14% and Decorative Architectural Products declining 5-10%.
Adjusted operating margin for the year is projected to be 15%, including 16% for both segments.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -5.02% due to these changes.
VGM Scores
Currently, Masco has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Masco has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Masco (MAS) Down 5% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Masco (MAS - Free Report) . Shares have lost about 5% 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 drivers.
Masco Q1 Earnings & Net Sales Beat Estimates
Masco Corporation reported better-than-expected results for first-quarter 2023. The and bottom line surpassed the Zacks Consensus Estimate. The company has been benefiting from strong pricing actions and operational improvements.
On the other hand, adjusted earnings and net sales declined on a year-over-year basis due to supply-chain challenges and inflation headwinds.
Masco’s president and CEO, Keith Allman, said, “While the headwinds we discussed last quarter continue, including softening demand trends, persistent inflation and tighter consumer spending, we have moved quickly to adjust our costs and successfully mitigated margin impact in the first quarter.”
Inside the Headlines
Masco reported adjusted earnings of 87 cents per share, which strongly beat the consensus mark of 65 cents by 33.9% but declined 10.3% from the year-ago figure of 97 cents.
Net sales of $1.98 billion topped the consensus estimate of $1.92 billion by 3.1% but decreased 10% from the prior-year period. Net sales fell 9% year over year in local currency. Sales in the North American region decreased 10% from the prior-year figure. Internationally, sales decreased by 9% as reported and by 3% in local currency.
Segmental Analysis
Plumbing Products: Sales in the segment fell 10% year over year to $1,222 million. In local currency, the segment’s sales (excluding acquisitions and divestitures) declined 8% year over year. Yet, the adjusted operating margin contracted 30 basis points (bps) year over year to 16.5%. Adjusted EBITDA decreased to $227 million from $252 million a year ago.
Decorative Architectural Products: The segment reported sales of $757 million, down 10% from the prior-year period’s number. Adjusted operating margin contracted 120 bps to 17.6%. Adjusted EBITDA declined to $141 million from the prior-year figure of $166 million.
Margins Performance
Adjusted gross margin improved 150 bps from the prior-year level to 33.6%. Adjusted selling, general and administrative expenses — as a percentage of net sales — were up 190 bps to 17.8% from the year-ago figure of 15.9%.
Adjusted operating margin contracted 40 bps on a year-over-year basis to 15.8% due to lower volumes, foreign currency and higher operational costs. Adjusted EBITDA also fell 11% year over year to $347 million.
Financials
As of Mar 31, 2023, Masco had total liquidity of $1.3 billion versus $1.45 billion in 2022 and $1.22 billion at March 2022-end. This includes cash and cash investments of $510 million compared with $452 million recorded at 2022-end. Long-term debt was $2.95 billion, flat from 2022-end. Net cash to operating activities was $33 million for the first quarter versus net cash for operating activities of $227 million in the prior-year period.
During the reported period, the company repurchased 1.1 million shares for $56 million.
2023 Guidance Maintained
Adjusted earnings are projected within $3.10-$3.40 per share. This indicates a decline from the 2022 level of $3.77 per share. Net sales are likely to decrease 10% in 2023, with Plumbing Products falling 10-14% and Decorative Architectural Products declining 5-10%.
Adjusted operating margin for the year is projected to be 15%, including 16% for both segments.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -5.02% due to these changes.
VGM Scores
Currently, Masco has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Masco has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.