Masco Misses on Q4 Earnings; Beats Revs - Analyst Blog

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Masco Corporation's ( MAS ), adjusted earnings of 15 cents per share in the fourth quarter of 2013 missed the Zacks Consensus Estimate of 17 cents by 11.8%. Earnings improved 150% from 6 cents in the year-ago quarter driven by solid revenues and strong operating leverage.

Masco's net sales of $2.0 billion, however, beat the Zacks Consensus Estimate of $1.98 billion by 1.01%. Revenues rose 9.1% year over year driven by strong sales from new products and international markets. Revenue growth was supported by robust top-line increase in all the segments.

North American sales increased 9% year over year to $1.60 billion on the back of increasing new home construction activity, increased repair and remodeling activities and new product launches. International sales rose 11% (7% in constant currency) to $395 million driven by an improvement in Europe.  

Margins

Adjusted gross profit grew 13.2% to $541 million in the quarter. Gross margin expanded 100 basis points (bps) year over year to 27.1% driven by top line growth, operating leverage and cost control.

Adjusted operating profit was $153 million in the quarter, up 48.5% from the prior-year quarter. Adjusted operating margin increased 210 bps year over year to 7.7% in the quarter, driven by increased operating leverage and solid gross margins. Operating margins improved 210 bps in North America to 8.9% and 110 bps in the international markets to 10.1%.

Segmental Analysis

Cabinets and Related Products: The Cabinets and Related Products segment revenues were $251 million in the quarter, up 9% year over year, driven by increased new housing starts, increased repair and remodeling activities and improving demand in the U.K. Segment operating margin was (1.6%), which is a 580 basis points improvement from the prior year quarter.

Plumbing Products: The segment recorded revenues of $799 million in the quarter, up 8% year over year driven by increased repair and remodeling activities, international growth and new programs. Adjusted operating margin of 12.1% improved 240 bps year over year driven by increased volume.

Installation and Other Services: Installation and Other Services segment revenues were $373 million in the quarter, up 15% year over year driven by increased volumes in new home construction, commercial, distribution and retrofit channels. Adjusted segment operating margin was 4.0%, up 210 bps from the prior year quarter owing to operating leverage and productivity improvements.

Decorative Architectural Products: Decorative Architectural Products segment revenues increased 6% to $408 million, driven by successful new product launches coupled with gains in its Pro business and internationally. Adjusted operating margin declined 60 bps to 16.2% hurt by higher advertising and promotional investments.

Other Specialty Products: Other Specialty Products segment revenues were $167 million in the quarter, up 9% year over year, driven by low-teens volume growth in the North American window business, favorable mix and net product introductions. The segment adjusted operating margin was 5.4%, up 80 bps due to operating leverage.

Full Year 2013

Masco's adjusted earnings of 77 cents per share in full year 2013 lagged the Zacks Consensus Estimate of 80 cents by 3.8%. Earnings improved 108% year over year from 37 cents driven by solid revenues and strong operating leverage.

Masco's net sales of $8.17 billion were up 9.0% year over year driven by strong sales from new products and international markets.

2014 Outlook

During 2014, the company expects further momentum in new home construction and repair and remodel activity in North America and the international markets. The company will continue to focus on innovation and improve leverage during 2014.

Masco Corporation currently carries a Zacks Rank #3 (Hold).

Other better-ranked stocks in the industrial goods sector include D. R. Horton Inc. ( DHI ), USG Corporation ( USG ) and Standard Pacific Corp. ( SPF ). While D. R. Horton sports a Zacks Rank #1 (Strong Buy), USG Corporation and Standard Pacific carry a Zacks Rank #2 (Buy).




D R HORTON INC (DHI): Free Stock Analysis Report

MASCO (MAS): Free Stock Analysis Report

STANDARD PAC (SPF): Free Stock Analysis Report

USG CORP (USG): Free Stock Analysis Report

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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 , Business , Earnings , Stocks

Referenced Stocks: DHI , MAS , SPF , USG

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