Australia Markets open in 6 hrs 19 mins

Masco (MAS) to Report Q3 Earnings: What's in the Cards?

Zacks Equity Research

Masco Corporation MTH is slated to report third-quarter 2019 results on Oct 30, before the opening bell.

In the last reported quarter, the company reported mixed results, wherein earnings topped the Zacks Consensus Estimate by 8.6% but revenues missed the same by 2.7%. On a year-over-year basis, its bottom line improved 15.8% owing to significant pricing actions and cost-control measures. However, its top line slipped marginally from a year ago due to lower volumes.

These headwinds are likely to have affected its performance in the to-be-reported quarter as well. However, strong pricing and cost-saving plan are likely to have offset the negatives to some extent.

Which Way are Estimates Trending?

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share has declined 1.4% over the past seven days to 70 cents. However, the estimated figure indicates a gain of 7.7% from 65 cents per share reported in the year-ago quarter. Revenues are expected to be $2.14 billion, indicating a 1.9% year-over-year increase.

 

Masco Corporation Price and EPS Surprise

 

Masco Corporation Price and EPS Surprise

Masco Corporation price-eps-surprise | Masco Corporation Quote

Factors at Play

Masco’s business highly focuses on repair and modelling activities. The company keeps on enhancing its existing portfolio with regular inorganic moves, which allow it carry out operational improvements, bolster go-to-market capabilities, and remove cyclical and lower-performing businesses. Also, cost-saving initiatives — which target company-wide annual savings through reduction of corporate expense and simplification of the organizational structure — have been helping it to generate higher profits. The positives from the above-mentioned factors are expected to have benefited Masco in the quarter to be reported.

However, lower volumes, softness in end-markets served and tariff-related woes are expected to have hurt its third-quarter performance.

Anticipated Segmental Performance

Masco’s Plumbing business (contributing more than 44% to revenues) is expected to have benefited from Delta, courtesy of Brizo brand and showrooms, Peerless brand at retail, and strength across all channels of distribution including wholesale, retail as well as e-commerce. Although lower volumes are likely to have hurt its top line, strong pricing activity is expected to have aided the segment in the to-be-reported-quarter. The Zacks Consensus Estimate for Plumbing Products revenues is currently pegged at $1,019 million, which implies 2.7% growth from $992 million in the year-ago period.

Also, the Decorative Architectural Products segment’s revenues — which are expected to have benefited from Kichler Lighting and its propane initiative — are likely to increase 2.4% from the prior-year period to $689 million.

The consensus mark for Windows and Other Specialty Products’ revenues is pegged at $207 million, suggesting an improvement from the year-ago reported figure of $197 million. However, the same for Cabinetry Products’ revenues is pegged at $232 million, implying a slight decrease from $239 million reported in the prior-year period.

Coming to margin performance, the Zacks Consensus Estimate for the Plumbing segment’s adjusted operating profit is currently pegged at $189 million, pointing to a decrease of 5% from $199 million reported in the prior year. Also, the said metric for Cabinetry Products is likely to decline 13.5% to $19.9 million from $23 million reported a year ago.

Nonetheless, adjusted operating profit for Decorative Architectural Products for the to-be-reported quarter is projected at $122 million, indicating a 2.5% growth from $119 million a year ago. The consensus mark for Windows and Other Specialty Products’ adjusted operating profit is pegged at $22.7 million, suggesting an improvement of 19.3% from the year-ago reported figure of $19 million.

Quantitative Model Prediction

Our proven model does not conclusively predict an earnings beat for Masco this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -2.68%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Masco currently carries a Zacks Rank #4 (Sell).

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

Stocks Worth a Look

Here are some companies in the Zacks Construction sector, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported.

Jacobs Engineering Group Inc. JEC has an Earnings ESP of +0.97% and holds a Zacks Rank #2.

Vulcan Materials Company VMC has an Earnings ESP of +8.24% and carries a Zacks Rank #2.

MasTec, Inc. MTZ has an Earnings ESP of +0.92% and a Zacks Rank #1.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Vulcan Materials Company (VMC) : Free Stock Analysis Report
 
Jacobs Engineering Group Inc. (JEC) : Free Stock Analysis Report
 
MasTec, Inc. (MTZ) : Free Stock Analysis Report
 
Meritage Corporation (MTH) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.