In line with the Zacks Consensus Estimate, Masco's third quarter
2014 earnings of $0.31 per share rose 15% year over year, driven by
strong margins and improved revenues. Sales of $2.23 billion missed
the Zacks Consensus mark by 1.8%, but grew 4% year over year on the
back of successful new product and program launches. Strength in
the plumbing wholesale channel, consistent increase across all
channels of the Installation segment, and solid momentum in the
North American and international window businesses led the top-line
growth. Net sales of the Cabinet segment increased year over year
during the quarter after declining in the past few quarters.
Overall, we are encouraged by Masco's continued focus on product
innovation and cost improvements. However, further consistency in
Cabinet segment improvement is yet to be seen. 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 is generated from
operations in North America, primarily in the U.S. Around 20% of
the company's sales is 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
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
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
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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