Masco (MAS) Q3 Earnings Top, Net Sales Miss, Margins Up
Masco Corporation MAS reported mixed results for third-quarter 2023. The bottom line surpassed the Zacks Consensus Estimate and increased from the prior year. Strong pricing actions and operational efficiency helped it deliver solid results.
However, net sales lagged the consensus mark and declined on a year-over-year basis. The benefits received from pricing actions were more than offset by lower volumes.
Shares of Masco jumped 8.96% in the pre-market trading session on Oct 25.
MAS focused on a balanced capital deployment strategy, returned $109 million to shareholders via dividends and share repurchases and completed a strategic bolt-on acquisition of Sauna360 Group Oy, which will expand its spa and wellness product offerings.
Inside the Headlines
Masco reported adjusted earnings of $1.00 per share, which beat the consensus mark of 91 cents by 9.9% and increased 1% from the year-ago figure of 99 cents.
Masco Corporation Price, Consensus and EPS Surprise
Masco Corporation price-consensus-eps-surprise-chart | Masco Corporation Quote
Net sales of $1.979 billion slightly missed the consensus estimate of $1.981 billion and decreased 10% from the prior-year period. Net sales fell 11% year over year in local currency, excluding acquisitions.
Sales in the North American region decreased 11% from the prior year. Internationally, sales decreased by 8%, on reported basis and by 11% in local currency.
Segmental Analysis
Plumbing Products: Sales in the segment fell 10% year over year to $1,191 million. In local currency, the segment’s sales, excluding acquisitions, declined 11% year over year.
The adjusted operating margin expanded 230 basis points (bps) year over year to 18.9%. Adjusted EBITDA increased to $251 million from $244 million a year ago.
Decorative Architectural Products: The segment reported sales of $788 million, down 10% from the prior-year period and 11% in local currency. Paints and other coating products declined in high single digit, while PRO paint sales fell in low-single digits against a mid-teen comps. DIY paint sales declined in low double digits during the quarter.
Adjusted operating margin expanded by 110 bps to 18.3%. Adjusted EBITDA, however, declined to $153 million from the prior-year figure of $159 million.
Margins Performance
Adjusted gross margin improved 430 bps from the prior-year level to 35.8%. Adjusted selling, general and administrative expenses — as a percentage of net sales — were up 260 bps to 18.2% from the year-ago figure of 15.6%.
Adjusted operating margin improved 170 bps on a year-over-year basis to 17.6% due to a favorable price/cost relationship and cost savings initiatives, partially offset by lower volumes. Adjusted EBITDA remained flat year over year at $385 million.
Financials
As of Sep 30, 2023, Masco had total liquidity of $1.56 billion versus $1.45 billion at 2022-end and $1.46 billion at Sep 2022-end. This includes cash and cash investments of $560 million compared with $452 million recorded at 2022-end. Long-term debt was $2.95 billion, flat from 2022-end.
Net cash from operating activities was $928 million for the first nine months of 2023 compared with $520 million in the prior-year period.
During the reported period, the company repurchased 0.8 million shares for $45 million.
2023 Guidance Updated
Backed by strong operational performance, the company raised its adjusted earnings expectation to $3.65-$3.75 per share from a prior projection of $3.50-$3.65. In 2022, MAS delivered adjusted earnings of $3.77 per share.
Net sales are likely to decrease 10% in 2023, with Plumbing Products falling 9-10% and Decorative Architectural Products declining 8-10%. Earlier, MAS anticipated Plumbing Products sales to fall 10-12%.
Adjusted operating margin for the year is now projected to be 16.5% versus 16% expected earlier. It now expects an adjusted operating margin of 17.5% for both segments, up from 17% projected earlier.
Zacks Rank & Recent Construction Releases
Masco currently carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
PulteGroup Inc. PHM reported mixed results in third-quarter 2023, wherein earnings surpassed the Zacks Consensus Estimates, but revenues missed the same. Both metrics increased year over year. The company has been banking on a solid operating model, which strategically aligns the production of build-to-order and quick-move-in homes with applicable demand across consumer groups.
Backed by its disciplined and balanced business model, the company witnessed solid orders in the reported quarter and posted a 12-month return on equity of 30.1%.
Watsco, Inc. WSO reported better-than-expected third-quarter 2023 results, with earnings and revenues topping the Zacks Consensus Estimate.
Watsco delivered record sales and earnings per share, driven by solid HVAC equipment sales growth, improved residential unit volumes and strong price realization. Also, the commercial end markets remained healthy in the quarter.
Armstrong World Industries, Inc. AWI reported better-than-expected results for third-quarter 2023, wherein earnings and net sales topped the Zacks Consensus Estimate. Also, both metrics increased on a year-over-year basis.
AWI’s growth trend was backed by a solid increase in operating income and adjusted EBITDA, accompanied by expanded margins. This was fueled by positive contributions from the Mineral Fiber as well as Architectural Specialties segments. Despite the challenging macroeconomic conditions, the company delivered strong results attributable to its diversified end markets, consistent Mineral Fiber average unit value growth and appealing growth initiatives.
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