Why Is Masco (MAS) Up 2.3% Since Its Last Earnings Report?

A month has gone by since the last earnings report for Masco Corporation (NYSE:MAS) . Shares have added about 2.3% in that time frame.

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

First-Quarter 2018 Results

Masco's first-quarter 2018 adjusted earnings missed analysts’ expectation and revenues surpassed the same. Growth in the quarter was driven by strong performance in the Plumbing, Decorative Architectural and North American windows business.

Earnings & Revenues

First-quarter 2018 adjusted earnings per share of 45 cents missed the Zacks Consensus Estimate of 49 cents by 8.2%. Adjusted earnings increased 13% year over year.

Net sales of $1.92 billion beat analysts’ expectation of $1.86 billion by about 3.2%. Sales also grew 8% year over year on the back of strong sales from Plumbing, Decorative Architectural and North American windows business.

Margins

Adjusted gross profit grew 3% to $625 million, while adjusted gross margin improved 150 bps to 32.6%.

Adjusted operating profit fell 3.5% to $250 million. Adjusted operating margin contracted 160 bps to 13%.

As a percentage of net sales, selling, general and administrative expenses were 19.5%, less than 19.6% reported in the prior-year quarter.

Segmental Analysis

Plumbing Products: The segment recorded revenues of $971 million, reflecting an increase of 11%. Excluding the impact of foreign currency translation, revenues increased 6% on growth in North America.

Adjusted operating margin of 16.9% declined 170 bps year over year.

Decorative Architectural Products: Segmental revenues of $545 million were up 10%, courtesy of the acquisition of Kichler, growth from Behr’s pro initiative and Liberty’s builders’ hardware business.

Adjusted operating margin fell 180 bps to 16.3%.

Cabinets and Related Products: Segmental revenues of $217 million declined 6% year over year, thanks to the divestiture of Moores and lower sales to U.S. builders.

Adjusted operating margin was 2.8% in the quarter, compared with 7.8% reported in the year-ago quarter.

Windows and Other Specialty Products: Segmental revenues totaled $187 million, up 4% year over year led by strength in the North American windows business.

Operating margin was 2.1% in the quarter compared with 4.5% a year ago.

Financials

Masco ended the quarter with cash and cash investments of $370 million, as of Mar 31, 2018, compared with $1.2 billion as of Dec 31, 2017.

Guidance Reiterated

For 2018, the company continues to expect adjusted earnings per share of $2.48 to $2.63.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. There have been two revisions higher for the current quarter compared to seven lower.

Masco Corporation Price and Consensus

VGM Scores

At this time, MAS has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile 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.

The company's stock is suitable solely for value based on our styles scores.

Outlook

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