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Will Masco (MAS) Deliver a Surprise this Earnings Season?

MAS LPX BCC MTH

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Masco Corporation (MAS - Free Report) is slated to release first-quarter 2017 numbers on Apr 25.

In the last reported quarter, the company posted a negative 5.7% surprise. Notably, the company surpassed the Zacks Consensus Estimate in two of the last four quarters, with an average earnings beat of 6.25%.

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

Factors at Play

Over 80% of Masco’s revenues are generated from repair/remodel activities. The company’s growth in the last few quarters has been primarily driven by steadily increasing repair and remodel activity. With the gradual improvement in the housing end market, there has been an increase in demand for new home construction and repair, remodeling products in all channels of distribution. This encouraging momentum is expected to continue.

However, adverse currency translations remain a headwind. About 21% of Masco’s sales are generated outside the U.S. As such, the company is subjected to adverse currency translation across the globe which may hurt Masco’s international sales in the soon-to-be reported quarter.

Notably, the company’s decision to exit builder direct business and retail kitchen countertop business is likely to impact sales by approximately $20 million in the first quarter of 2017. Masco also anticipates approximately $5 million of costs in the quarter pertaining to product introductions.

Meanwhile, for the first quarter, the Zacks Consensus Estimate for earnings is pegged at 36 cents a share, reflecting an increase of 11.3% year over year, while the consensus for revenues is at $1.75 billion, implying 1.7% year-over-year growth.

Earnings Whispers

Our proven model does not conclusively show that Masco is likely to beat earnings this quarter. That 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. That is not the case here as you will see below.

Zacks ESP:  Masco has an Earnings ESP of 0.00%. That is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 36 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Masco Corporation Price and EPS Surprise

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

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

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:

Meritage Corporation (MTH - Free Report) , with an Earnings ESP of +2.38% and a Zacks Rank #2, is expected to release its quarterly numbers on Apr 27.

Boise Cascade, L.L.C. (BCC - Free Report) , with an Earnings ESP of +44.44% and a Zacks Rank #1, is expected to report its quarterly numbers on May 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Louisiana-Pacific Corporation (LPX - Free Report) , with an Earnings ESP of +27.59% and a Zacks Rank #1, is slated to report its quarterly results on May 5.

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