Earnings Preview: Masco Corporation - Analyst Blog

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We expect Masco Corporation ( MAS ), a manufacturer of home improvement and building products, to beat expectations when it reports first quarter 2013 results on April 30.

Why a Likely Positive Surprise?

Our proven model shows that Masco is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method ), which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at +23.08%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks Rank #2 (Buy): Masco carries a Zacks Rank #2 (Buy). Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.  

The combination of Masco's Zacks Rank #2 and +23.08% ESP makes us very confident in looking for a positive earnings beat on Apr 30.

What is Driving the Better Than Expected Earnings?

Masco is expected to witness strong first quarter 2013 performance on the back of its improving North American business, turnaround efforts and profit improvement initiatives.

North American sales are gaining momentum attributable to increasing new home construction activity, new product launches and pricing growth. The new home construction activity in North America is benefiting from improved demand and affordability of homes, owing to low mortgage rates, increased rentals and rising home prices.

Masco had adopted several strategic initiatives, in order to strengthen its business. The initiatives include the improvement of underperforming businesses like Installation and Cabinet; leveraging its brands, new product introduction and product innovation, and initiatives to reduce costs and strengthen its balance sheet.  

The company is already benefiting from the above mentioned factors. As such, one can see the positive trend in the trailing four-quarter average surprise of 166.41%, which was greatly helped by the 500.0% surprise in the last-reported quarter. These factors are expected to further drive the company's profit in the upcoming quarters.

Other Stocks to Consider

Masco is not the only firm looking up this earnings season. We also see likely earnings beats coming from these 3 companies from the same industry:

Headwaters Incorporated ( HW ), Earnings ESP of +33.33% and Zacks Rank #2


United Rentals, Inc. ( URI ), Earnings ESP of +2.94% and Zacks Rank #3 (Hold)

Aegion Corporation ( AEGN ), Earnings ESP of +2.17% and Zacks Rank #3



AEGION CORP (AEGN): Free Stock Analysis Report

HEADWATERS INC (HW): Free Stock Analysis Report

MASCO (MAS): Free Stock Analysis Report

UTD RENTALS INC (URI): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: AEGN , HW , MAS , URI

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