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Masco (MAS) Q3 Earnings & Revenues Miss Estimates, View Cut

Zacks Equity Research

Masco Corporation MAS came up with disappointing results in third-quarter 2019. Both the top and bottom line missed the Zacks Consensus Estimate.

Resultantly, it lowered its earnings guidance for 2019.

Nonetheless, the company’s revenues and earnings improved year over year, driven by growth in both Plumbing Products and Decorative Architectural Products segments.

Masco Corporation Price, Consensus and EPS Surprise

Masco Corporation Price, Consensus and EPS Surprise

Masco Corporation price-consensus-eps-surprise-chart | Masco Corporation Quote

Inside the Headlines

Masco reported adjusted earnings of 68 cents per share, missing the consensus mark of 70 cents by 2.9%. Also, revenues of $1,947 million lagged analysts’ expectation of $2,146 million by 9.3%.

Nonetheless, both the top and bottom lines increased 2% and 11%, respectively, on a year-over-year basis. North American sales (in local currency) grew 3% from the prior-year period and 5% internationally.

Segmental Analysis

Plumbing Products: Sales in the segment inched up 1% year over year to $1,006 million. Excluding the impact of foreign currency translation, sales grew 3% year over year. Adjusted operating margin was flat year over year at 17.8%. Adjusted EBITDA grew 4.5% year over year to $208 million.

Decorative Architectural Products: The segment reported sales of $710 million, up 5% from the prior-year period. The upside was mainly attributable to growth in paints and other coating products. Adjusted operating margin increased 340 basis points (bps) to 18.9%. Adjusted EBITDA also increased 12.4% from the prior-year period to $145 million.

Cabinets and Related Products: The segment’s sales during the quarter totaled $231 million, down 3% year over year, primarily owing to mix, partially offset by strong pricing. Nonetheless, adjusted operating margin rose 170 bps to 11.3%. Also, adjusted EBITDA increased to $30 million from the prior-year figure of $26 million.

Meanwhile, the company announced that it will divest Cabinetry and Windows businesses, and the segment will be treated as discontinued operations. During the quarter, Masco completed the sale of the UK Window business, and signed a definitive agreement to sell the Milgard Windows and Doors business.

Margins Performance

During the reported quarter, adjusted gross margin came in at 34.4%, which improved 80 bps from the prior year. Adjusted selling, general and administrative expenses — as a percentage of net sales — were flat with the year-ago figure of 17.7%.

Adjusted operating profit increased 8% from the prior-year quarter to $326 million. In addition, adjusted operating margin increased 80 bps on a year-over-year basis to 16.7%. Adjusted EBITDA also grew 7.1% year over year to $362 million.

Financials

As of Sep 30, 2019, the company had cash and cash investments of $475 million, lower than $553 million recorded at the end of 2018. Net cash from operating activities was $605 million in the first nine months of 2019 compared with $654 million in the comparable year-ago period.

It repurchased 3.8 million shares during the quarter via its repurchase program.

2019 View Cut

The company lowered its 2019 adjusted earnings guidance to $2.52-$2.56 per share from earlier guided range of $2.62-$2.72. The bottom line in the prior-year quarter was $2.50 per share.

Zacks Rank

Masco — which shares space with Armstrong World Industries, Inc. AWI, Louisiana-Pacific Corporation LPX and Owens Corning OC in the Zacks Building Products - Miscellaneous industry — currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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