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Will Masco (MAS) Pull Off a Surprise This Earnings Season?

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Masco Corporation (MAS - Free Report) is set to report second-quarter 2016 results on Jul 26, before the market opens. 

Last quarter, Masco had posted a positive surprise of 28.0%. In fact, the earnings history of this home improvement and building products company is rather impressive. Masco surpassed estimates in the past four quarters, resulting in an average positive surprise of 16.09%.  

Let’s see how things are shaping up for this announcement.

MASCO Price and EPS Surprise

MASCO Price and EPS Surprise | MASCO Quote


Factors to Consider

Masco has been witnessing strong demand for its leading products since the past few quarters, as both the repair and remodeling industry as well as the new home construction industry are improving. This trend is expected to continue in the soon-to-be reported quarter.

Masco’s earnings, revenues and margin increased year over year in 2015 and the first quarter 2016. We expect the strong trends in earnings, revenues and margins to continue in the to-be-reported quarter as well.

About 21% of Masco’s sales are generated outside U.S, subjecting the company to the impact of currency translation across the globe. Though the U.S. dollar is getting weaker, the negative impact of unfavorable currency translations is still significant. Masco’s international sales may be dampened in the soon-to-be reported quarter.  

Earnings Whispers

Our proven model does not conclusively show that Masco is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. But that is not the case here, as you will see below.

Zacks ESP: Masco’s Earnings ESP is 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate stand at 42 cents.

Zacks Rank: Though the company’s Zacks Rank #3 increases the predictive power of ESP, Masco’s ESP of 0.00% makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are some companies in the broader construction sector that can be considered as our model shows that they have the right combination of elements to post an earnings beat this quarter:

  • Louisiana-Pacific Corp. (LPX - Free Report) with an Earnings ESP of +4.0% and a Zacks Rank #1
  • Owens Corning (OC - Free Report) with an Earnings ESP of +9.41% and a Zacks Rank #1
  • Potlatch Corp. (PCH - Free Report) with an Earnings ESP of +42.86% and a Zacks Rank #2


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