We have maintained a Neutral rating on
) following appraisal of first quarter 2012 results.
Masco Corporation reported earnings of 5 cents per share in the
first quarter of 2012 versus a loss of 4 cents per share in the
first quarter of 2011. Earnings also beat the Zacks Consensus
expectation of breakeven earnings. Improved top-line growth as well
as impressive margins drove the earnings beat this quarter.
Sales in the quarter were up 7.0% over the prior-year period to
$1.88 billion driven by improved volumes in the repair/remodel as
well as new home construction businesses which were until now
struggling to perform. An improving housing market combined with
new product launches and overall share gains led to the volume
growth in the quarter. Total sales also swept past the Zacks
Consensus Estimate of $1.83 billion.
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Masco Beats on Volume
Masco Corporation manufactures, sells, and installs home
improvement and building products. Its mains products and services
include plumbing products, cabinets and related products,
installation and other services, decorative architectural products,
and other specialty products. The company is a leading cabinetry
manufacturer in the U.S. and holds the largest share in faucets and
The company owns some of the popular brands like KraftMaid and
Merillat cabinets, Delta and Hansgrohe faucets, Behr paint and
Milgard windows. Moreover, the company is also experimenting on new
products. We believe that the company's leadership brands, its
continued focus on innovation and new product launches can help
drive growth in the long term.
The U.S. housing industry has begun to show some signs of
improvement. Housing demand is improving, affordability is
increasing and prices are stabilizing. Management believes that its
cost cutting initiatives and top-line growth efforts, though
failing to fetch the desired results in 2011, will drive
significant improvement in 2012, even if the housing market remains
flat. The strong first quarter results are a testament to the
Moreover, the company's restructuring initiatives are almost
done. These initiatives are expected to result in about $150
million of gross cost reduction before inflation in 2012.
Management believes the segments that were most hurt by
restructuring, namely Installation and North American Cabinet
Operations, have begun to show signs of growth and the recovery is
expected to continue through 2012.
Though there have been signs of a nascent improvement in the
housing market so far in 2012 and Masco is expecting significant
improvement this year, we prefer to wait and see how the year
actually shapes up for the company. Particular emphasis will be on
the cabinet business which has been sluggish since some time now.
Besides, the Euro-zone crisis has capped overall economic activity
limiting top-line growth at Masco. Further, rising prices of raw
materials and an expensive valuation are matters of concern.
MASCO (MAS): Free Stock Analysis Report
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