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What's in the Cards for Masco (MAS) This Earnings Season?

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Masco Corporation (MAS - Free Report) is scheduled to report first-quarter 2018 results on Apr 24, before the market opens.

Masco continues to expand its portfolio with more acquisitions. In January, the company signed an agreement to take over Kichler Lighting. The acquisition will complement Masco’s product line. The company is optimistic about the prospect of expansion into the fragmented $6-billion U.S. residential lighting industry.

Moreover, Masco acquired Mercury Plastics, Inc. in the fourth quarter of 2017. Mercury Plastics manufactures water handling systems for appliances and faucets as well as various other plumbing products. The company posted revenues of $45 million in 2017.

These acquisitions are expected to prove accretive to Masco’s earnings in the to-be-reported quarter.

Let us delve into other factors that might impact Q1 results.

Strong Repair/Remodel Activity to Boost Revenues

Repair and remodel activity has been a key growth driver, contributing 80% to Masco’s revenues. Strong demand from repair and remodeling products in all channels of distribution led to a 4% increase in North American sales in 2017. KraftMaid, the company’s leading repair and remodel brand, came up with a solid performance in retail and dealer channels. The brand posted mid-single digit growth on increased volumes in 2017.  The trend is expected to continue in the to-be-reported quarter.

Arrow Fastener Divesture to Hurt Results

Due to the sale of Arrow Fastener, the company’s first-half sales and operating profit will be reduced by approximately $30 million and $6 million, respectively, split evenly between the first and second quarter.

Increased Investments in Showroom Displays

Masco projects additional spending of $4 million in the first half of 2018 split equally between the first and second quarters. This is due to Plumbing segment’s Delta brand’s investments in showrooms displays. The company anticipates approximately $12 million of investment during the first quarter, thanks to new store displays of cabinets at the Menards stores.

Segment Performance

Coming to the different reportable segments, Plumbing Products, comprising about 46% of total revenues, is expected to contribute substantially to overall growth. The Zacks Consensus Estimate for Plumbing Products revenues of $948 million reflects growth of 9.8% on a year-over-year basis.

The Cabinets segment is expected to witness little growth this quarter. The consensus estimate for the segment’s revenues of $233 million reflects year-over-year rise of 0.7%.

Decorative Architectural Products is expected to grow 3% year over year in the first quarter, owing to strong pro paint growth and Liberty Hardware business. Revenues at Windows and Other Specialty Products are expected to inch up 1.1%.

Overall, for the first quarter, the Zacks Consensus Estimate for total revenues is pegged at $1.86 billion, implying 4.6% growth. This is likely to translate into higher earnings. The Zacks Consensus Estimate for earnings is pegged at 49 cents, reflecting a 19.5% year-over-year increase.

Quantitative Model Prediction

Our proven model does not show that Masco is likely to beat earnings estimates this quarter. 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.

Masco has an Earnings ESP of 0.00% and a Zacks Rank #3, which does not make us confident of an earnings beat. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Notably, the stock has surpassed the Zacks Consensus Estimate in two of the trailing four quarters, with an average positive surprise of 3.5%. Last quarter, the company came up with a positive earnings surprise of 2.3%.

Masco Corporation Price and EPS Surprise


Stocks Worth a Look

Here are a few construction stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.

D.R. Horton (DHI - Free Report) has an Earnings ESP of +1.72% and a Zacks Rank #3 (Hold). The company is set to report quarterly results on Apr 26. You can see the complete list of today’s Zacks #1 Rank stocks here.

Meritage Homes (MTH - Free Report) has an Earnings ESP of +0.31% and a Zacks Rank #3. The company is about to report quarterly results on Apr 25.

M.D.C. Holdings (MDC - Free Report) has an Earnings ESP of +1.89% and holds a Zacks Rank #2. The company is set to report quarterly results on May 3.

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