Masco Corporation (MAS): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report


Masco's adjusted earnings of $0.31 per share in the third quarter of 2014 came in line with the Zacks Consensus Estimate. Earnings increased 15% year over year driven by improved revenues. However, elevated costs in Cabinet significantly hurt profits in the quarter and are expected to continue to drag earnings in the fourth quarter as well. Overall, we are encouraged by Masco's continued focus on product innovation and cost improvements. Moreover, the decision to spin off the homebuilding-dependent installation business will reduce the cyclicality of Masco's portfolio. However, while most divisions are doing well, the Cabinet business continues to under perform, recording continuing losses. Masco expects the Cabinet segment to remain soft in the upcoming period due to lower demand and ERP-related disruptions. We, therefore, maintain our Neutral recommendation on the stock.


Headquartered in Taylor, MI, Masco Corporation (MAS) manufactures, sells and installs home improvement and building products. These products are sold through mass merchandisers, hardware stores, home centers, homebuilders, distributors and other outlets for consumers and contractors, and direct to consumers.

Approximately 80% of the company's sales are generated from operations in North America, primarily in the U.S. Around 20% of the company's sales are generated outside the U.S., mainly in Europe. The company's largest customer is The Home Depot Inc.

Masco operates through five business segments: Plumbing Products, Cabinets and Related Products, Installation and Other Services, Decorative Architectural Products and Other Specialty Products.

Plumbing Products (38% of 2013 revenues): The segment manufactures and markets an array of faucets, bathing and showering devices, valves, bathtubs, spas and toilets (launched in 2012).

Cabinets and Related Products (13%): The segment manufactures and sells stock and semi-custom, assembled cabinetry for kitchen, bath, storage, home office and home entertainment applications in both North America and Europe. In North America, the company also sells kitchen countertops, integrated bathroom vanity and countertop solutions. In Europe, it also sells ready-to-assemble cabinetry for kitchen.

Installation and Other Services (1%): In this segment, Masco sells installed building products, installed gutters, after-paint products, fireplaces and garage doors. The company also distributes building products in the new home construction market. The company, however, plans to divest this business into a separate independent company by mid-2015.

Decorative Architectural Products (24%): The segment manufactures architectural coatings, including paints, primers, specialty paint products, stains and waterproofing products. These products are sold in the U.S., Canada, China, Mexico and South America. The company's Behr branded products are principally sold through The Home Depot. The segment also manufactures Liberty and Brainerd branded cabinets, doors, windows and other hardware which are sold to home centers, retailers, wholesalers and original equipment manufacturers.

Other Specialty Products (8%): The segment manufactures a full range of windows and doors, manual and electric staple gun tackers, staples and other fastening tools.

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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 , Stocks

Referenced Stocks: MAS

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