) adjusted earnings of 13 cents per share in the first quarter of
2013 lagged the Zacks Consensus Estimate of 14 cents by 7.1%.
Results however improved 85.7% year over year driven by strong
performance in North America, the company's turnaround efforts
and profit improvement initiatives.
Masco's net sales of $1.88 billion lagged the Zacks Consensus
Estimate of $1.99 billion by 5.5%. We believe that the top line
missed the Zacks Consensus Estimates due to weak international
Revenues however rose 3.9% year over year driven by volume
growth. Volumes benefited from new product and program launches
and increase in new home construction activity in the U.S. Though
Cabinets and Related Product and Installation and Plumbing
businesses contributed significantly to the revenue growth in the
quarter, net sales of Decorative Architectural Products remained
flat year over year.
International sales declined 2% to $366 million due to weakness
in the Eurozone. However, North American sales increased 6% year
over year to $1.51 billion on the back of increasing new home
construction activity and new product launches. New home
construction activity in North America continues to benefit
from improved demand and affordability of homes, owing to low
mortgage rates, increased rentals and rising home prices. Big
ticket remodeling purchases, however, continue to remain weak.
Adjusted gross profit grew 4.1% to $514 million in the quarter.
Gross margins were 27.4%, flat year over year. Adjusted operating
profit was $140 million in the first quarter of 2013, up 18.6%
from the prior-year quarter, driven by solid volume growth.
Adjusted operating margin increased 100 (bps) year over year to
7.5% in the quarter on the back of volume growth and cost savings
from its strategic initiatives.
Masco undertook several strategic initiatives to strengthen
its business. The initiatives included the improvement of
underperforming businesses like Installation and Cabinet;
leveraging its brands, new product introduction and product
innovation, and efforts to reduce costs and strengthen its
balance sheet. During the first quarter of 2013, the company
benefited from new product and program introduction, which
contributed to the company's profitability. Its cabinetry
business also improved and witnessed breakeven results.
Cabinets and Related Product posted breakeven results during the
quarter, driven by improved leverage due to volume growth in
The company ended first quarter 2013 with $1.03 billion
compared to $1.4 billion in cash at the end of 2012.
The company expects improved results in 2013 as both new home
construction and repair and remodel activities continue to
recover. Repair/remodeling activities are expected to improve,
though modestly. However, management continues to be apprehensive
about the weak big ticket remodeling industry. The company is
also cautious about Europe and expects the general economic
uncertainty in the region to continue.
Masco carries a Zacks Rank #2 (Buy). We are encouraged by
Masco's continued focus on product innovation and cost
improvements. The company is benefiting from the recovery in new
home construction and repair and remodel activities. However,
weak consumer spending on big ticket remodeling and sluggish
European economy remain headwinds.
HEADWATERS INC (HW): Free Stock Analysis
JAMES HARDI-ADR (JHX): Free Stock Analysis
MASCO (MAS): Free Stock Analysis Report
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