Masco Swings to Profit in 4Q - Analyst Blog

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Masco Corporation 's ( MAS ) adjusted earnings of 4 cents per share in the fourth quarter of 2012 beat the Zacks Consensus Estimate of a loss of 1 cent by a wide margin. Results were significantly better than the prior-year quarter loss of 9 cents, driven by an increase in sales and operating margins, especially in North America.

Masco's net sales of $1.89 billion in the reported quarter were also ahead of the Zacks Consensus Estimate of $1.81 billion by 4.4%. Revenues rose 8.6% year over year driven largely by sales increase in North America as the higher demand for new homes led to increased demand for Masco's products. The increase in sales is attributed to improvement in the new home construction market in North America, new product launches, and higher selling prices.

North American sales increased 12% year over year, driven by improved housing market. International organic sales rose 2% due to improved sales in retail and international channels.

Margins

Adjusted operating profit was $94 million in the fourth quarter of 2012, up significantly from $27 million in the prior-year quarter, driven by improved price commodity mix and solid volume rise. Adjusted operating margin increased to 5.0% in the quarter, up 340 basis points from the prior-year quarter, owing to strong operating leverage, pricing improvement and total cost optimization.

Adjusted gross profit grew 24.5% to $473 million in the quarter. Gross profit margins were 25.0%, up 310 basis points in the quarter. The strong results were driven by the cost control and supply chain strategies adopted by the company.

Segmental Analysis

Cabinets and Related Products: The Cabinets and Related Products segment revenues were $289 million in the fourth quarter, up 1% year over year, due to a 13% rise in sales in North America, driven by solid business in countertop, retail, dealer and builder channels. The segment operating loss of $26 million improved from the prior-year quarter loss of $38 million.

Plumbing Products: The segment recorded revenues of $739 million in the fourth quarter of 2012, up 10% year over year, driven by solid business in North America as well as international markets. The segment also benefited from the introduction of new products and programs in the quarter. Segment operating profit of $72 million improved from the prior-year quarter by 28.6%.

Installation and Other Services: Installation and Other Services segment revenues were $323 million in the quarter, up 13% year over year, owing to a rise in construction of new homes, growth in retro sales and commercial sales. Segment adjusted operating profit of $6 million improved from the prior-year quarter loss of $6 million.

Decorative Architectural Products: Decorative Architectural Products segment revenues were $386 million in the quarter, up 11% year over year, owing to improved business in core products and launch of new programs. Segment adjusted operating profit of $65 million improved 85.7% from the prior-year quarter.

Other Specialty Products: Other Specialty Products segment revenues were $153 million in the quarter, up 6% year over year, driven by an increase in market share.The segment reported adjusted operating profit of $7 million compared to a flat growth in the prior year quarter.

Full Year 2012

Masco Corporation's adjusted earnings of 32 cents per share for full year 2012 beat the Zacks Consensus Estimate of 27 cents. Earnings increased significantly from the prior-year quarter earnings of 2 cents, driven by an increase in new home construction activity in North America.

Masco's net sales of $7.75 billion for full year 2012 were up 4% year over year, driven by increase in new home construction activities in North America and a number of product innovations.  

Outlook

The company expects to continue its strategy of brand building, cost control, improving liquidity position and growth in the Installation and Cabinet segments in the upcoming quarters. However, management is apprehensive about the weak big ticket remodeling industry.

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

Many other stocks in the sector are currently performing well. These include Armstrong World Industries, Inc. ( AWI ) with a Zacks Rank #1 (Strong Buy) and Drew Industries Inc. ( DW ), and Headwaters Incorporated ( HW ) with a Zacks Rank #2 (Buy).



ARMSTRONG WORLD (AWI): Free Stock Analysis Report

DREW INDS INC (DW): Free Stock Analysis Report

HEADWATERS INC (HW): Free Stock Analysis Report

MASCO (MAS): 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 , Stocks

Referenced Stocks: AWI , DW , HW , MAS

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