Masco (MAS) Misses Earnings And Revenue Estimates In Q3

Masco Corporation’s (NYSE:MAS) third-quarter 2016 results missed both earnings and revenue estimates.

Adjusted earnings of 41 cents per share in the third quarter of 2016 missed the Zacks Consensus Estimate of 44 cents by 6.8%. Meanwhile, adjusted earnings increased 21% year over year driven by strong margins.

Masco’s net sales of $1.88 billion missed the Zacks Consensus Estimate of $1.91 billion. Net sales were up 2% from the prior-year quarter owing to sales growth across most segments, except Cabinet and Windows and Other Specialty Products.

In local currency, North American sales increased 2% driven by growing demand for repair and remodeling and new home construction products in an improving U.S. economy. International sales increased 1%

MASCO Price, Consensus and EPS Surprise

MASCO Price, Consensus and EPS Surprise | MASCO Quote

Margins

Adjusted gross profit grew 5.3% to $618 million while adjusted gross margin improved to 32.9%.

Adjusted operating profit rose 7% to $275 million.

Adjusted operating margin increased 70 basis points (bps) to 14.7% on increased operating leverage and solid cost control. As a percentage of net sales, selling, general and administrative expenses (adjusted) increased 40 bps to 18.3%.

Adjusted operating margin increased 10 bps to 16.0% in North America and 280 bps to 15.8% in international markets.

Segmental Analysis

Cabinets and Related Products: Segmental revenues of $239 million declined 6% year over year due to the exit of the company from lower margin business in the builder channel, which was partially offset by growth in the retail and dealer channels.

The company reported adjusted operating profit of $20 million (up from $19 million a year ago) driven by higher operating efficiencies and a favorable mix. Adjusted operating margin was 8.4% in the quarter, up 90 bps from the year-ago quarter.

Plumbing Products: The segment recorded revenues of $899 million, up 5%. Organic revenues increased 6% buoyed by growth in North America and internationally.

Adjusted operating margin of 19.9% increased 370 bps year over year.

Decorative Architectural Products: Segmental revenues of $536 million were up 2%, as growth from paints and other coating products was partially offset by the timing and amount of promotions.

Operating margin increased 100 bps to 20.7%.

Windows and Other Specialty Products: Segmental revenues totaled $203 million, down 1% year over year. Organic revenues increased 2% owing to strong performance by the North American windows business.

Outlook

Masco expects stronger demand for its leading products in 2016.

The company currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Better-ranked stocks in the industry include Argan, Inc. (NYSE:AGX) , CRH plc (TO:CRH) and NCI Building Systems Inc. (NYSE:NCS) . All three of the companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Argan’s full-year 2016 earnings are expected to grow 51.03%.

CRH earnings are expected to grow a solid 67.35% in 2016.

NCI Building’s earnings are expected to grow 83.33% in fiscal 2016.

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>