On Jun 25, we issued an updated research report on
After a strong 2013, Masco began 2014 on a softer note missing
the Zacks Consensus Estimate for both revenues and earnings in the
first quarter, as North American sales and profitability were
impacted by rough weather and slowdown in construction
Adjusted earnings of 15 cents per share for this Zacks Rank #4
(Sell) company increased 15.4% year over year as decent margins
made up for the relatively softer revenue performance. Revenues of
$1.97 billion grew 4.8% year over year as strong international
sales made up for softer North American revenues.
Currently, around 70% of Masco's top line is contributed by
repair/remodel activity and the remaining 30% comes from new home
construction. With the U.S. residential activity slowing down in
the second half of 2013, demand for Masco's products in the
construction market has begun to decline. Rising interest rates,
higher home prices, unfavorable weather conditions, shortage of
lots and skilled labor, rising cost of materials and declining
inventory of new homes have slowed down the housing recovery in the
latter half of 2013 and early 2014.
Despite improving in 2013, Masco's Cabinet business remained
weak in the first quarter of 2014 due to severe weather and
slowdown in housing construction. Though management expects sales
to pick up in the second half of 2014 helped by product launches
and improvement in the weather, we are not confident about a
turnaround in the second quarter.
However, in spite of the near-term weakness, we have faith in
Masco's strong fundamentals. We are encouraged by its leading brand
portfolio, continued focus on product innovation and cost
improvements. Further, Masco boasts partnership with some of the
biggest companies. In the direct to builder channel, it serves
large homebuilders like
D.R. Horton, Inc.
). In the retail channel, it has partnerships with big-box
retailers like Home Depot and Lowe's. Masco is the largest supplier
of non-commodity products to Home Depot's and kitchen and bath
aisle to Lowe's.
Moreover, though housing has slowed down lately, it is believed
that construction spending will gain steadily through the remaining
of this year. The housing recovery is expected to result in a
simultaneous rise in demand and volume for Masco's home improvement
products. The positive trends in new home construction, repair and
remodel, home price appreciation, and an increase in big ticket
spending in North America are expected to continue through the rest
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