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Here's Why You Should Add Masco Stock to Your Portfolio Now

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Headquartered in Taylor, MI, Masco Corporation (MAS - Free Report) manufactures, sells and installs home improvement and building products.

The company ended first-quarter 2017 with an impressive 28.1% growth in earnings on 4% rise in revenues. Increasing demand for repair and remodeling and new home-construction products is driving strong sales growth.

Overall, homebuilding companies like Masco, NVR, Inc. (NVR - Free Report) , PulteGroup Inc. (PHM - Free Report) , Lennar Corp. (LEN - Free Report) , KB Home (KBH - Free Report) , have lately been riding high given solid housing/homebuilding fundamentals. Masco, a Zacks Rank #1 (Strong Buy) company has solid prospects and should make for a valuable addition to your portfolio. You can see the complete list of today’s Zacks #1 Rank stocks here.

Why is Masco a Solid Pick?

Stock Price Movement: Masco’s shares have increased 17.9% year to date, outperforming the Zacks categorized Building & Construction Products – Miscellaneous industry’s gain of 3.8%. That said, we have noticed that Masco has outperformed the industry in each of four-week, 12-week and 52-week time frames. Compelling 2017 outlook for the U.S. homebuilding industry due to affordable interest rates, tight inventory, an improving economy, modest wage growth, low unemployment levels and positive consumer confidence, should drive the stock’s performance in the upcoming quarters.



Growth Prospects: More than 80% of Masco’s revenues are generated through repair/remodel activity. Masco’s growth in the last few quarters has mostly been driven by steadily growing repair and remodel activity. As the housing end market is improving steadily, there is an increasing demand for new home construction and repair, remodeling products in all channels of distribution and across price ranges. This improving momentum is expected to continue which in turn will improve demand for Masco’s products.

Although Masco has put up a historical EPS growth rate of 27.4% compared with the industry average of 11.4%, investors should actually focus on the projected growth. Here, the company is expected to grow at a rate of 29.6% for 2017, while the Zacks categorized Building & Construction Products – Miscellaneous industry’s earnings are expected to increase 9.4%. Meanwhile, sales growth is projected to be 4.2% for 2017.

Cost-Saving Initiatives: Masco’s cost-saving initiatives have been driving the company’s margin in the last few quarters. It aims at reaching company-wide annual savings through reduction in corporate expense and simplification of Masco’s organizational structure. These initiatives include business consolidations, system implementations, plant closures, branch closures, improvement in the global supply chain and headcount reductions.

The company’s operating margin expanded 60 basis points (bps) year over year in the first quarter. Its North American market witnessed 100 bps increase in operating margin, while 180 bps in its international markets.

Estimate Revisions: Masco exceeded earnings expectations in two of the last four quarters, with an average beat of 3.53% in the trailing four quarters.

In the last 60 days, the Zacks Consensus Estimate for Masco moved north by 5.4% to $1.96 per share for 2017 and 4.3% to $2.17 per share. The positive earnings estimate revisions indicate analysts’ confidence and substantiate the stock’s Zacks Rank #1.

Solid Housing Fundamental: Core housing fundamental metrics have touched new highs in recent times, thanks to a healthy job market and uptick in finances that are helping buyers with the wherewithal to make purchases. The latest report from the National Association of Realtors (NAR) revealed that existing home sales (which account for the bulk of the market) declined 2.3%, to a seasonally adjusted annual rate of 5.57 million units, on April. Despite a 2.3% decline in April, last month's sales pace marks the fourth highest in the last 12 months. Existing home sales rose 4.4% in March. It is important to note that sales figures are highly volatile month to month.

The uptick in mortgage rates seems to be having minimal effect on the industry as a whole. The 2017 outlook for the U.S. homebuilding industry is quite compelling and adding the stock to your portfolio should not be a disappointment.

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