Intense Inflationary Pressure to Ail Masco (MAS) Q4 Earnings

Masco Corporation (NYSE:MAS) MAS is scheduled to report fourth-quarter 2021 results on Feb 8, before the opening bell.

In the last reported quarter, the company’s top and bottom lines beat the Zacks Consensus Estimate by 4.7% and 13.8%. Net sales improved 11.1% on strong demand across the categories and channels but earnings declined 6.6% year over year, owing to supply chain constraints and inflation.

Nonetheless, earnings surpassed the consensus mark in each of the trailing seven quarters.

Trend in Estimate Revision

The Zacks Consensus Estimate for Masco’s fourth-quarter earnings is pegged at 71 cents per share, implying a decline of 5.3% from the year-ago reported figure of 75 cents. Earnings estimates for the said period have moved 1.4% north in the past seven days, reflecting analysts’ optimism over the company’s growth potential. The consensus estimate for net sales stands at $1.98 billion, indicating a 6.2% increase from the prior-year period.

Factors to Note

Masco’s revenues are likely to reflect robust performance across Decorative Architectural Products and Plumbing Products segments in the fourth quarter. Geographically, North America and International markets have been banking on solid demand from the housing industry, in turn benefiting the company.

The business has been highly focused on housing and repair and remodeling activities. With solid economic prospects, the demand for housing and building material products remained robust, given the increasing trend of consumers to invest more in homes amid the pandemic.

It has been enhancing its existing portfolio via regular acquisitions, which might have allowed the company to carry out operational improvements.

DIY demand is likely to have remained stabilized in fourth-quarter 2021. Also, the bottom line is likely to have been hurt by intense inflationary pressure, particularly on commodity and logistics. The overall industry has been experiencing supply chain constraints and material, transportation, and labor inflation that have been driving cost inflation. Although cost price neutrality is expected to have been attained in the fourth quarter, inflation is likely to have peaked (in mid-teens).

The company expects additional SG&A increases to have a significant impact on Plumbing's operating margins in the fourth quarter. Apart from raw material costs, it has been incurring expenses related to product launches.

The Zacks Consensus Estimate for Plumbing Products’ sales of $1,265 million indicates a 7.9% improvement from the year-ago reported figure. The same for non-GAAP operating profit is pegged at $190 million, implying a decrease of 15.2% from the prior-year reported figure.

The consensus mark for the Decorative Architectural Products segment’s sales is currently pegged at $717 million, implying a 4.2% increase from the year-earlier reported number. The same for non-GAAP operating profit is pegged at $108 million, implying a decrease from $109 million a year ago.

What the Zacks Model Unveils

Our proven model predicts 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Currently, MAS has a Zacks Rank #2 and an Earnings ESP of +6.13%.

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

Other Stocks with Favorable Combination

Here are some other 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.

Boise Cascade (NYSE:BCC) Company BCC has an Earnings ESP of +9.09% and a Zacks Rank #1.

Shares of Boise Cascade have gained 63% over the past year. BCC’s earnings topped the consensus mark in all the last four quarters, with the average being 45.5%.

Louisiana-Pacific (NYSE:LPX) Corp. LPX has an Earnings ESP of +1.08% and a Zacks Rank #1.

Shares of Louisiana-Pacific have gained 69.8% over the past year. LPX’s earnings topped the consensus mark in all the last four quarters, with the average being 10.5%.

Martin Marietta Materials (NYSE:MLM), Inc. MLM has an Earnings ESP of +1.40% and a Zacks Rank #3.

Shares of MLM have gained 31.1% over the past year. In the trailing four quarters, MLM’s earnings topped the consensus mark twice but missed the same on the other two occasions, with the average surprise being 33.4%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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