) adjusted earnings of 23 cents per share in the second quarter
of 2013 surpassed the Zacks Consensus Estimate of 19 cents by
21.1%. Earnings results improved 109.1% year over year driven by
strong performance in North America, solid margin expansion, the
company's turnaround efforts and profit improvement initiatives.
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Masco's net sales of $2.15 billion surpassed the Zacks Consensus
Estimate of $2.10 billion by 2.4%.
Revenues rose 10.3% year over year driven by volume growth.
Volumes benefited from new product and program launches and
increase in new home construction activity in the U.S. Revenue
growth was supported by robust top line increase in all the
segments. Net sales increased 5% in Cabinets and Related
Products, 9% in Plumbing businesses, 21% in Installation, 9% in
Decorative Architectural Products and 13% in Other Speciality
International sales rose 7% to $384 million despite weakness in
the Eurozone. North American sales increased 11% year over year
to $1.77 billion on the back of increasing new home construction
activity and new product launches. Despite recent increase in
interest rates and rising home prices, new home construction
activity in North America continues to benefit from improved
demand and affordability of homes, owing to increased rentals. In
addition, repair and remodeling activity is improving.
Adjusted gross profit grew 18.3% to $620 million in the quarter.
Gross margins expanded 200 basis points year over year to 28.9%.
Adjusted operating profit was $206 million in the second quarter
of 2013, up 57.3% from the prior-year quarter. Adjusted operating
margin increased 290 (bps) year over year to 9.6% in the quarter
on the back of favorable price/ commodity mix and total cost
Masco has undertaken several strategic initiatives to strengthen
its business. These include improvements in underperforming
businesses like Installation and Cabinet; leveraging its brands,
new product introduction and product innovation, and efforts to
reduce costs and strengthen its balance sheet. For the past two
quarters, the company has benefited from new products and program
The company ended second quarter 2013 with cash and cash
investments of $1.22 billion compared to $1.03 billion in first
The company expects improved results in 2013 as both new home
construction and repair and remodel activities continue to
recover. However, the company is also cautious about Europe and
expects the general economic uncertainty in the region to
continue. The company will continue to invest in its brands,
reduce cost and debt.
Masco carries a Zacks Rank #3 (Hold). We are encouraged by
Masco's continued focus on product innovation and cost
improvements. The company is benefiting from the recovery in new
home construction and repair and remodel activities. However, a
sluggish European economy remains a headwind.
Other stocks in the sector that are performing well and deserve a
James Hardie Industries plc
). James Hardie Industries carries a Zacks Rank #1 (Strong Buy)
whereas both USG Corporation and Aegion Corporation carry a Zacks
Rank #2. (Buy).