Masco's adjusted earnings of $0.24 per share in the fourth quarter
of 2014 beat the Zacks Consensus Estimate by 20%. Earnings
increased 60% year over year driven by improved revenues and strong
margins. Though net sales of $2.06 billion missed the Zacks
Consensus Estimate by 1.4%, it grew 3% year over year on the back
of strong sales growth in Plumbing, Decorative Architectural
Products, Other Specialty and Installation segments, partially
offset by weakness in Cabinets. Overall, we are encouraged that,
with an improving U.S. economy Masco continue to witness growing
demand for repair and remodeling and new home construction
products. However, performance at Cabinet segment is expected to
continue 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
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
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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