After a strong 2013,
) began 2014 on a softer note missing the Zacks Consensus
Estimate for revenues and earnings as a harsh winter hurt North
American construction activity in the quarter, thereby hurting
demand for Masco's products.
Adjusted earnings of 15 cents per share in the first quarter of
2014 missed the Zacks Consensus Estimate of 18 cents by 16.7%.
Earnings increased 15.4% from 13 cents in the year-ago quarter
driven by solid margin expansion, cost controls and better
Masco's net sales of $1.97 billion slightly lagged the Zacks
Consensus Estimate of $2.0 billion by 1.5% as housing slowdown in
the second half of 2013 lowered demand for Masco's products. The
top line was also impacted by harsh weather conditions.
However, revenues rose 4.8% year over year as strong
international sales made up for softer North American revenues.
North American sales increased 3% year over year to $1.56
billion. International sales rose 12% (7% in constant currency)
to $409 million driven by new product launches, an improvement in
Europe and strong performance by international window businesses.
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Adjusted gross profit grew 7.2% to $551 million in the quarter.
Gross margin improved 60 basis points (bps) to 28.0% helped by
revenue gains and solid cost controls.
Adjusted operating profit was $157 million in the quarter, up
12.1% from the prior-year quarter. Adjusted operating margin
increased 50 bps year over year to 8.0% in the quarter, driven by
increased operating leverage and solid gross margins.
Cabinets and Related Products:
Cabinets and Related Products segment revenues were $237 million
in the quarter, flat year over year. The company witnessed higher
sales to dealers and builders, offset by weak sales to retailers.
Operating loss was $9 million in the quarter, worse than a
breakeven in the prior-year quarter due to headwinds from ERP
optimization, plant closure and unfavorable weather. Adjusted
operating margin was (3.8%) in the quarter.
In Dec 2013, the company divested its underperforming Danish
ready-to-assemble cabinet business to a Danish company.
The segment recorded revenues of $800 million in the quarter, up
5% year over year driven by strong international sales, revenue
from new products and solid sales to wholesale/trade. Adjusted
operating margin of 15.1% improved 370 bps year over year driven
by increased revenues in most of the channels.
Installation and Other Services:
Installation and Other Services segment revenues were $335
million in the quarter, up 7% year over year, driven largely by
an increase in sales in the commercial and distribution
channels. Adjusted segment operating margin was (1.2%), up
10 bps from the prior-year quarter, driven by multi family mix,
investment to expand business and unfavorable weather.
Decorative Architectural Products:
Decorative Architectural Products segment revenues increased 2%
to $441 million, driven by successful new product launches
coupled with gains in its Pro business and internationally.
Market share gain in several new programs and volume increase in
builders' hardware drove the sales increase. Adjusted operating
margin declined 340 bps to 17.2% hurt by higher advertising and
Other Specialty Products:
Other Specialty Products segment revenues were $152 million in
the quarter, up 13% year over year, driven by share expansion in
the the North American and International window business. Segment
adjusted operating margin was 3.3%, up 400 bps, owing to a solid
The company ended first-quarter 2014 with cash and cash
investments (including short-term bank deposits) of $1.21 billion
compared with $1.5 billion at the end of fourth-quarter 2013.
Masco carries a Zacks Rank #3 (Hold).
Other Stocks to Consider
Other better-ranked stocks in the building/construction sector
United Rentals, Inc.
William Lyon Homes
). While William Lyon Homes sports a Zacks Rank #1 (Strong Buy),
United Rentals and PulteGroup carry a Zacks Rank #2 (Buy).