) third-quarter 2013 adjusted earnings of 27 cents per share beat
the Zacks Consensus Estimate of 25 cents by 8% and the year-ago
quarter's earnings of 14 cents by 92.9%. Solid revenues and
margins drove the earnings during the quarter.
Masco's net sales of $2.15 billion also surpassed the Zacks
Consensus Estimate of $2.10 billion by 2.4%. Revenues rose 12.4%
year over year, driven by robust top-line increase in all the
operational segments. Quarterly revenues benefited from the
improvement in new home construction activity in North America
and improving repair and remodel activity.
Revenues by Segment
The company generates revenues from five business segments -
Cabinets and Related Products, Plumbing Products, Installation
and Other Services, Decorative Architectural Products, and Other
International sales rose 9% to $394 million with slow
improvement in the Euro zone. North American sales increased 13%
year over year to $1.76 billion on the back of increasing new
home construction activity and product launches.
Cabinets and Related Products:
Cabinets and Related Products segment revenues were up 15% year
over year to $262 million in the third quarter with sales
improving across all channels (direct to builder, dealer and
retail) as well as brands (KraftMaid, Merillat and
The segment's revenues of $820 million increased 11% year over
year, driven by increased faucet and toilet sales in North
Installation and Other Services segment:
Installation and Other Services segment's revenues were up 19%
from the prior-year level to $370 million, with the rise in
construction of new homes.
Decorative Architectural Products:
Decorative Architectural Products segment revenues increased 9%
year over year to $522 million in the third quarter, benefiting
from product and program launches.
Other Specialty Products:
Other Specialty Products segment revenues were $176 million, up
13% from the year-ago level, due to strong growth in North
American window sales.
Adjusted gross profit grew 17.4% to $613 million in the quarter.
Gross margins expanded 120 basis points (bps) year over year to
28.5%. Adjusted operating profit was $222 million in the third
quarter, up 50% from the prior-year quarter. Adjusted operating
margin increased 260 bps year over year to 10.3% in the quarter
on the back of solid volume growth.
The company ended the third quarter with cash and cash
investments of $1.01 billion compared to $1.22 billion in the
The company expects better results, going ahead, as both new
home construction and repair and remodel activities continue to
recover despite believing that the overall economic recession
will continue. However, the company is cautious about Europe and
expects the general economic uncertainty in the region to
Masco has undertaken several strategic initiatives to
strengthen its business. These include improvements in
underperforming businesses like Installation and Cabinet;
leveraging its brands, product introduction and product
innovation, and efforts to reduce costs and strengthen its
balance sheet. Management believes that it will continue to gain
from product and program introductions.
Masco carries a Zacks Rank #2 (Buy). We are positive about the
long-term fundamentals of Masco. We are encouraged by Masco's
continued focus on product innovation and cost improvements.
Other Stocks to Consider
Other stocks in the sector that are performing well and
deserve a mention include
Universal Forest Products Inc.
Boise Cascade Company
). Universal Forest carries a Zacks Rank #1 (Strong Buy), whereas
both Boise Cascade and Rayonier carry a Zacks Rank #2.
BOISE CASCADE (BCC): Free Stock Analysis
MASCO (MAS): Free Stock Analysis Report
RAYONIER INC (RYN): Free Stock Analysis
UNIVL FST PRODS (UFPI): Free Stock Analysis
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