Masco (MAS) to Report Q2 Earnings: What's in the Offing?
Masco Corporation MAS is scheduled to report second-quarter 2020 results on Jul 30, before the opening bell.
In the last reported quarter, the company’s top and bottom lines handily beat the Zacks Consensus Estimate by 3.6% and 27.8%, as well as improved 4% and 24.3% year over year, respectively. The upside was backed by strong contributions of North American plumbing products, and paint and other coating products.
Second-Quarter Expectations
The Zacks Consensus Estimate for Masco’s second-quarter earnings is pegged at 71 cents per share, implying a decline of 19.3% on a year-over-year basis. The consensus estimate for revenues is $1.69 billion, indicating 25.6% year-over-year fall.
Masco Corporation Price and EPS Surprise
Masco Corporation price-eps-surprise | Masco Corporation Quote
Factors to Note
Masco’s second-quarter revenues are likely to have impacted by coronavirus-led restrictions and shutdowns imposed to contain the coronavirus spread. Lower customer traffic and big box retail store restrictions on the sale of certain categories in various states may have also added to the woes. Meanwhile, the company’s international business has been witnessing lower volumes. Shelter-in-place restrictions might have also been concerns.
Nonetheless, the business is highly focused on repair and modelling activities. It has been enhancing the existing portfolio via regular inorganic moves, which allow it carry out operational improvements, improve go-to-market capabilities, and remove cyclical and lower-performing businesses. Cost-saving initiatives, which target company-wide annual savings through the reduction of corporate expense and simplification of its organizational structure, have been helping it generate improved margins.
At mid-June, the company updated second-quarter outlook, after witnessing a better-than-anticipated rebound in sales. It expects second-quarter revenues to be down 8% year over year versus prior expectation of a decline of 15-20%. Masco noted that the increased sales would provide a boost to margins. It expects decremental margins to be better than the previously announced guided range of 35-40%.
Segment-Wise Discussion
The updated guidance was mostly driven by the Plumbing segment, which accounted for 54.9% of 2019 revenues. However, the spa business within the Plumbing unit is expected to have been more severely impacted than other businesses by forced closure of plants in California and Mexico. Sales in the Plumbing Products segment are expected to be down 19% (excluding currency) compared with 30-35% decline year over year.
The Zacks Consensus Estimate for Plumbing Products’ sales of $798 million indicates a decline of 21.1% year over year. The same for adjusted EBITDA is currently pegged at $157 million, which implies a decline of 28.6% from $220 million in the year-ago period and 10% sequential decrease.
Second-quarter performance of the Decorative Architectural Products unit might have been impacted by the loss of a portion of a private label program in inventory rebalancing at a customer. Nonetheless, it expects sales in the Decorative Architectural Products segment to increase 6% year over year. Earlier, it was expected to be flat on an annualized basis.
The consensus mark for the Decorative Architectural Products segment’s sales is currently pegged at $868 million, implying almost 8% year-over-year increase. The same for adjusted EBITDA is pegged at $197 million, pointing to an increase of 7.7% from the prior-year period and 84.1% from third-quarter 2020.
Quantitative Model Prediction
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 chances of an earnings beat.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +0.24%. 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 #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Other Stocks Worth a Look
Here are some stocks in the same space that you may also want to consider, as our model shows that these too have the right combination of elements to post an earnings beat in the upcoming releases.
Armstrong World Industries, Inc. AWI has an Earnings ESP of +13.97% and a Zacks Rank #2.
TopBuild Corp. BLD has an Earnings ESP of +29.11% and a Zacks Rank #1.
Owens Corning OC has an Earnings ESP of +47.78% and a Zacks Rank #3.
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Masco Corporation (MAS) : Free Stock Analysis Report
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