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Masco (MAS) Down 3.3% Since Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Masco Corporation (MAS - Free Report) . Shares have lost about 3.3% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is MAS due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Recent Earnings

Masco’s fourth-quarter 2017 adjusted earnings per share of 44 cents surpassed the Zacks Consensus Estimate of 43 cents by 2.3%. Adjusted earnings increased 33% year over year.

Net sales of $1.87 billion beat analysts’ expectation of $1.83 billion by about 2.2%. Sales grew 7% year over year on the back of strong sales of Plumbing and Decorative Architectural Products.

North American sales increased 5.8% year over year to $1.5 billion and international sales were up 9.5% to $405 million.

Margins

Adjusted gross profit grew 6.9% to $617 million, while adjusted gross margin improved 10 basis points (bps) to 32.9%.

Adjusted operating profit increased 19.9% to $265 million. Adjusted operating margin rose 150 bps to 14.1%.

As a percentage of net sales, selling, general and administrative expenses (adjusted) were 18.8%, less than 20.2% reported in the prior-year quarter.

Adjusted operating margin increased 70 bps to 16.2% in North America and rose 180 bps to 12.3% in international markets.

Segmental Analysis

Plumbing Products: The segment recorded revenues of $972 million, increasing 9%. Excluding the impact of foreign currency translation, revenues increased 6% on growth in North America and internationally.

Adjusted operating margin of 17.5% rose 30 bps year over year.

Decorative Architectural Products: Segmental revenues of $494 million were up 12% on strong volume growth from coatings and builders’ hardware.

Operating margin increased 90 bps to 17.8%.

Cabinets and Related Products: Segmental revenues of $223 million decreased 5% year over year.

Adjusted operating margin was 11.2% in the quarter, compared with 8.1% reported in the year-ago quarter.

Windows and Other Specialty Products: Segmental revenues totaled $185 million, down 3% year over year due to the divestiture of Arrow Fastener. Excluding the impact of the divestiture, net sales increased 6% led by strength in the North American windows business.

Operating margin was 2.7% in the quarter compared with 3.1% a year ago.

2017 Highlights

Masco’s adjusted earnings per share of $1.94 in 2017 increased 28% year over year. Net sales climbed 4% to $7.6 billion.

Adjusted operating profit margin expanded 70 bps to 15.3%.

Financials

Masco ended the quarter with cash and cash investments of $1.2 billion, as of Dec 31, 2017, compared with $990 million as of Dec 31, 2016.

Guidance

For 2018, the company expects adjusted earnings per share of $2.48 to $2.63.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. There have been two revisions higher for the current quarter compared to three lower.

Masco Corporation Price and Consensus

 

Masco Corporation Price and Consensus | Masco Corporation Quote

VGM Scores

At this time, MAS has a strong Growth Score of A, though it is lagging a lot on the momentum front with a C. The stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is primarily suitable for growth investors than those looking for momentum and value investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Interestingly, MAS has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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