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Masco's (MAS) Delta to Buy Kraus, Boost Plumbing Offerings

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Zacks Equity Research
·4 min read
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Delta Faucet Company, a unit of Masco Corporation MAS, has inked a deal to acquire the assets of Kraus, an online plumbing fixture company. However, the financial terms of the transaction — which is slated to close in first-quarter 2021 — are not yet disclosed.

Delta is a leader in faucets, bath and shower fixtures, as well as related accessories. It manufactures Delta, Brizo and Peerless branded products. Delta’s extensive product line, which combines design and innovation, suits both residential and commercial buildings.

Buyout Synergies

This acquisition will bolster Delta Faucet’s portfolio comprising modern, high-quality sinks, faucets and related products. This apart, Kraus’ complementary products — primarily kitchen and lavatory sinks, as well as accessories — will give a major boost to Delta’s product offerings. Importantly, Kraus’ strong online presence is expected to strengthen its market-leading offerings and drive growth amid the COVID-19 pandemic scenario.

The pandemic has accelerated the shift toward a more digital world and triggered changes in online shopping behaviors that are likely to have lasting effects. Notably, Kraus will operate as an affiliate of Delta.

Masco’s Plumbing Products segment (accounting for 54.9% of net sales) manufactures and markets an array of faucets, bathing and showering devices, valves, bathtubs, spas, as well as toilets. This segment’s products are classified under Delta, Brizo, Peerless, Hansgrohe, Axor, Ginger, Newport Brass, Brasstech, Waltec, Bristan, Heritage, Mirolin, Ha Ppe, Hot Spring, Caldera, Freeflow Spas, Fantasy Spas, Endless Pools, Brasscraft, Plumb Shop, Cobra, Cobra Pro, And Master Plumber brands.

Acquisitions Serve as Growth Driver

Masco has been expanding its portfolio with more and more acquisitions. In sync with this strategy, Masco's majority-owned subsidiary, Hansgrohe entered into an agreement in November 2020 to buy a majority stake in a Dutch company, Easy Sanitary Solutions or ESS. Although financial terms of the deal are not yet disclosed, the deal is expected to close during first-quarter 2021. Notably, ESS will operate as a subsidiary of Hansgrohe SE. Headquartered in Oldenzaal, The Netherlands, ESS is the inventor, developer and manufacturer of Easy Drain shower channels, and offers a wide range of products for barrier-free showering as well as bathroom wall niches.

The company continues to invest in industry-leading branded building products, and its persistent focus on innovation and disciplined capital allocation will enable it to drive long-term growth as well as create value for shareholders.

Furthermore, as the housing end market is improving steadily, there is increasing demand for new home construction, and repair and remodeling products in all channels of distribution as well as across the price range. This momentum is expected to continue, which in turn will improve the demand for Masco's products.

Its shares have underperformed the industry so far this year. Nonetheless, this Zacks Rank #2 (Buy) company has been benefiting from solid performance across both Plumbing Products and Decorative Architectural Products segments, along with strong demand and cost-saving efforts.

Other Stocks to Consider

Investors can also consider other stocks in the Zacks Building Products – Miscellaneous industry such as Owens Corning Inc. OC, Construction Partners, Inc. ROAD and TopBuild Corp. BLD. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks #1 Ranked Owens Corning’s earnings for 2021 are expected to grow 24.1%.

Also a Zacks Rank #1 stock, Construction Partners’ earnings for the current year are expected to increase 16.7%.

Zacks #2 Ranked TopBuild’s earnings for 2021 are expected to grow 21.3%.

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