News

A month has gone by since the last earnings report for Masco (MAS). Shares have lost about 1.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Masco due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Masco Q1 Earnings Beat Estimates, Margins Rise Y/Y

Masco Corporation reported mixed results for first-quarter 2024, wherein earnings surpassed the Zacks Consensus Estimate, but net sales lagged the same.

On a year-over-year basis earnings increased despite net sales decline. Strong operational efficiency helped it deliver solid earnings. Masco’s focus on a balanced capital deployment strategy helped it return $212 million to shareholders via dividends and share repurchases.

Inside the Headlines

Masco reported adjusted earnings per share (EPS) of 93 cents, which beat the consensus mark of 87 cents by 6.9% and increased 8.1% from the year-ago figure of 86 cents.

Net sales of $1.93 billion missed the consensus estimate of $1.95 billion and decreased 3% from the prior-year period due to lower volumes, partially offset by Sauna360 acquisition and pricing actions. Net sales fell 4% year over year in local currency and excluding acquisitions.

Sales in the North American region decreased 2% from the prior year. Internationally, sales declined 5% in local currency.

Segmental Analysis

Plumbing Products: Sales in the segment fell 2% year over year to $1.19 billion. In local currency and excluding acquisitions, net sales declined 4% year over year. North American sales decreased 1% (declined 4% excluding acquisitions) in local currency.

The adjusted operating margin expanded 260 basis points (bps) year over year to 19.1%. Adjusted EBITDA increased to $255 million from $227 million a year ago.

Decorative Architectural Products: The segment reported sales of $734 million, down 3% from the prior-year period. Paints and other coating products sales were relatively flat, while PRO and DIY paint were in-line with the year-ago period.

Adjusted operating margin contracted 60 bps to 17% due to pricing. Adjusted EBITDA also declined to $134 million from the prior-year figure of $141 million.

Margins Performance

Adjusted gross margin improved 210 bps from the prior-year level to 35.7%. Adjusted selling, general and administrative expenses — as a percentage of net sales — were up 130 bps to 19.1% from the year-ago figure of 17.8%.

Adjusted operating margin improved 90 bps on a year-over-year basis to 16.7% due to a favorable price/cost relationship and cost-savings initiatives, partially offset by lower volumes. Adjusted EBITDA increased 3.7% year over year at $360 million.

Financials

As of Mar 31, 2024, Masco had a total liquidity of $1.32 billion versus $1.63 billion at 2023-end. This includes cash and cash investments of $368 million compared with $634 million recorded at 2023-end. Long-term debt was $2.95 billion, flat from 2023-end.

Net cash for operating activities was $94 million for the first quarter versus net cash from operating activities of $33 million in the prior-year period.

During the reported period, the company repurchased 2.1 million shares for $148 million.

2024 Guidance

The company still expects its adjusted EPS in the range of $4.00-$4.25 versus $3.86 in 2023. Net sales are likely to be up/down by low single digits from the 2023 level of $7.97 billion. Net sales in both segments are anticipated to increase/decrease in the low single digits.

Adjusted operating margin for the year is projected to be nearly 17%. It expects an adjusted operating margin of 18.5% in Plumbing and 18% in Decorative Architectural.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

At this time, Masco has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Masco has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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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 Nasdaq, Inc.