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Masco (MAS) Gears Up for Q2 Earnings: What's in the Cards?
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Masco Corporation (MAS - Free Report) is scheduled to report second-quarter 2018 results on Jul 31, before the opening bell. In the last reported quarter, the company’s earnings missed the Zacks Consensus Estimate by 8.16%. In fact, the company missed the consensus mark for earnings in two of the trailing four quarters, recording an average negative surprise of 2.87%.
Factors That Might Influence Q2 Results
Given solid underlying demand, supported by favorable household formation trends and a strengthening macro environment, building product companies like Masco are likely to register solid gains. Meanwhile, construction spending in the United States has increased lately, supported by a steady increase in outlays on private as well as public construction projects. Sustained growth in construction activity drives demand for the companies’ products, thereby helping to boost the top line.
Masco’s repair and model business has been a key growth driver, contributing 80% to Masco’s revenues. The business has been performing well and the trend is likely to continue in the to-be-reported quarter, given solid housing fundamentals. KraftMaid, the company’s leading repair and remodel brand, posted mid-single digit growth on increased volumes in the first quarter. The trend is expected to have continued in the to-be-reported quarter as well.
Additionally, Masco continues to expand its portfolio via acquisitions. In the first quarter, the company completed the acquisition of Kichler Lighting. Through the deal, the company aims to expand in the fragmented $6-billion U.S. residential lighting industry.
Masco regularly divests the less profitable and underperforming businesses to focus on its core areas, in a bid to accelerate growth and improve shareholder value. The company had earlier expressed that due to the sale of Arrow Fastener, its sales and operating profit in the first half of 2018 will be reduced by approximately $30 million and $6 million, respectively, split evenly between the first and second quarter.
The company has been undertaking strategic growth investments that will continue in the second quarter as well. Masco had earlier projected additional spending of $4 million in the first half of 2018, split equally between the first and second quarter. This is due to investments by Plumbing segment's Delta brand in showrooms displays. These investments will diminish in the third and fourth quarter, leading to a stronger second half of 2018.
Segment Performance
Coming to the different reportable segments, Plumbing Products, comprising about 50.6% of the total revenues, is expected to contribute substantially to overall growth. The Zacks Consensus Estimate for Plumbing Products revenues of $1,019 million reflects growth from $971 million in the first quarter and $949 million in the year-ago period.
The Cabinets segment is expected to decline 0.8% year over year but increase 14.7% sequentially to $249 million.
Decorative Architectural Products is expected to grow 26% year over year and 51% sequentially in the second quarter, owing to growth from both Behr and Liberty, as well as the Kichler Lighting acquisition, which closed in early March. Revenues at Windows and Other Specialty Products are expected to inch up 0.5% year over year and 9.6% sequentially.
Overall, acquisitions & divestitures — increasing demand for repair and remodeling, as well as product launches — are expected to drive sales growth. However, higher material costs raise concern.
For the second quarter, the Zacks Consensus Estimate for total revenues is pegged at $2.29 billion, implying 11.3% growth. This is likely to translate into higher earnings. The Zacks Consensus Estimate for earnings is pegged at 76 cents, reflecting a 26.7% year-over-year increase.
Our proven model does not show that Masco is likely to beat earnings estimates in the to-be-reported 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.
You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Masco has an Earnings ESP of +1.79% and a Zacks Rank #4 (Sell), which does not make us confident of an earnings beat. It is to be noted that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.
Notably, the stock surpassed the Zacks Consensus Estimate in two of the trailing four quarters, recording an average negative surprise of 2.87%.
Stocks to Consider
Here are some companies in the same industry, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported:
Fluor Corporation (FLR - Free Report) has an Earnings ESP of +1.45% and carries a Zacks Rank #3. The company is scheduled to report quarterly numbers on Aug 2, 2018.
GCP Applied Technologies Inc. has an Earnings ESP of +2.56% and carries a Zacks Rank #3. The company is slated to report quarterly numbers on Aug 7, 2018.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
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Masco (MAS) Gears Up for Q2 Earnings: What's in the Cards?
Masco Corporation (MAS - Free Report) is scheduled to report second-quarter 2018 results on Jul 31, before the opening bell. In the last reported quarter, the company’s earnings missed the Zacks Consensus Estimate by 8.16%. In fact, the company missed the consensus mark for earnings in two of the trailing four quarters, recording an average negative surprise of 2.87%.
Factors That Might Influence Q2 Results
Given solid underlying demand, supported by favorable household formation trends and a strengthening macro environment, building product companies like Masco are likely to register solid gains. Meanwhile, construction spending in the United States has increased lately, supported by a steady increase in outlays on private as well as public construction projects. Sustained growth in construction activity drives demand for the companies’ products, thereby helping to boost the top line.
Masco’s repair and model business has been a key growth driver, contributing 80% to Masco’s revenues. The business has been performing well and the trend is likely to continue in the to-be-reported quarter, given solid housing fundamentals. KraftMaid, the company’s leading repair and remodel brand, posted mid-single digit growth on increased volumes in the first quarter. The trend is expected to have continued in the to-be-reported quarter as well.
Additionally, Masco continues to expand its portfolio via acquisitions. In the first quarter, the company completed the acquisition of Kichler Lighting. Through the deal, the company aims to expand in the fragmented $6-billion U.S. residential lighting industry.
Masco regularly divests the less profitable and underperforming businesses to focus on its core areas, in a bid to accelerate growth and improve shareholder value. The company had earlier expressed that due to the sale of Arrow Fastener, its sales and operating profit in the first half of 2018 will be reduced by approximately $30 million and $6 million, respectively, split evenly between the first and second quarter.
The company has been undertaking strategic growth investments that will continue in the second quarter as well. Masco had earlier projected additional spending of $4 million in the first half of 2018, split equally between the first and second quarter. This is due to investments by Plumbing segment's Delta brand in showrooms displays. These investments will diminish in the third and fourth quarter, leading to a stronger second half of 2018.
Segment Performance
Coming to the different reportable segments, Plumbing Products, comprising about 50.6% of the total revenues, is expected to contribute substantially to overall growth. The Zacks Consensus Estimate for Plumbing Products revenues of $1,019 million reflects growth from $971 million in the first quarter and $949 million in the year-ago period.
The Cabinets segment is expected to decline 0.8% year over year but increase 14.7% sequentially to $249 million.
Decorative Architectural Products is expected to grow 26% year over year and 51% sequentially in the second quarter, owing to growth from both Behr and Liberty, as well as the Kichler Lighting acquisition, which closed in early March. Revenues at Windows and Other Specialty Products are expected to inch up 0.5% year over year and 9.6% sequentially.
Overall, acquisitions & divestitures — increasing demand for repair and remodeling, as well as product launches — are expected to drive sales growth. However, higher material costs raise concern.
For the second quarter, the Zacks Consensus Estimate for total revenues is pegged at $2.29 billion, implying 11.3% growth. This is likely to translate into higher earnings. The Zacks Consensus Estimate for earnings is pegged at 76 cents, reflecting a 26.7% year-over-year increase.
Masco Corporation Price and EPS Surprise
Masco Corporation Price and EPS Surprise | Masco Corporation Quote
Quantitative Model Prediction
Our proven model does not show that Masco is likely to beat earnings estimates in the to-be-reported 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.
You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Masco has an Earnings ESP of +1.79% and a Zacks Rank #4 (Sell), which does not make us confident of an earnings beat. It is to be noted that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.
Notably, the stock surpassed the Zacks Consensus Estimate in two of the trailing four quarters, recording an average negative surprise of 2.87%.
Stocks to Consider
Here are some companies in the same industry, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported:
Armstrong World Industries, Inc. (AWI - Free Report) has an Earnings ESP of +1.73% and carries a Zacks Rank #2. The company is slated to report quarterly numbers on Jul 31, 2018. You can see the complete list of today’s Zacks #1 Rank stocks here.
Fluor Corporation (FLR - Free Report) has an Earnings ESP of +1.45% and carries a Zacks Rank #3. The company is scheduled to report quarterly numbers on Aug 2, 2018.
GCP Applied Technologies Inc. has an Earnings ESP of +2.56% and carries a Zacks Rank #3. The company is slated to report quarterly numbers on Aug 7, 2018.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>