Soft Consumer Spending to Hurt Masco's (MAS) Q2 Earnings Y/Y
Masco Corporation MAS is scheduled to report second-quarter 2023 results on Jul 27, before the market open.
In the last reported quarter, the company’s earnings and net sales topped the Zacks Consensus Estimate by 33.9% and 3.1%, respectively. However, both the bottom and the top lines declined 8.4% and 10.1%, respectively on a year-over-year basis.
Masco’s earnings have topped the consensus mark in nine of the trailing 13 quarters.
The Trend in Estimate Revision
For the quarter to be reported, the Zacks Consensus Estimate for earnings per share has remained unchanged at 95 cents over the past 30 days. The estimated figure indicates a 16.7% decline from the year-ago level.
Masco Corporation Price and EPS Surprise
Masco Corporation price-eps-surprise | Masco Corporation Quote
For net sales, the consensus mark is pegged at $2,095 million, suggesting a decline of 10.9% from the year-ago quarter’s reported figure.
Let's check out the factors that are likely to have influenced the quarter.
Key Factors at Play
Masco is likely to have witnessed lower net sales on a year-over-year basis in second-quarter 2023. Restricted consumer spending and increased interest rates, reflecting soft housing demand, are expected to have ailed Masco’s revenue performance. Owing to economic uncertainties, the consumers are more selective and price conscious, reflecting the comparatively lower spending on a year-over-year basis. Given the headwinds, Masco’s solid brand portfolio and long-term growth initiatives are likely to partially benefit its top-line growth.
Geographically, for second-quarter 2023, our model predicts North America and International (mainly Europe) net sales to decline 11.9% and 8% year over year to $1,678.5 million and $411 million, respectively.
Meanwhile, business segment-wise, Plumbing Products (accounted for 60.9% of 2022 net sales) and Decorative Architectural Products (accounted for 39.1% of 2022 net sales) segments net sales are likely to decline 10.5% and 12% year over year to $1,228.2 million and $861.3 million, respectively.
Although Masco’s second-quarter results are expected to reflect tough year-over-year comparisons, the company is likely to register higher net sales and earnings sequentially, given the improving housing market scenario.
For the second quarter, the bottom line of the company is likely to have been dented due to persisting inflationary pressures, lower volumes, high input costs and ongoing investments for long-term growth. These costs are expected to have had a negative impact on the company’s operations as well as hurt margins in the to-be-reported quarter.
Owing to the aforementioned economic risks, our model predicts consolidated adjusted operating margin to decline 200 basis points year over year to 15.6% in the second quarter.
Segment-wise, our model predicts the adjusted operating margin of the Plumbing Products segment to decline to 16.5% in the second quarter from 17.3% in the year-ago period. The same for the Decorative Architectural Products segment is currently pegged at 16.7%, reflecting a decrease from 20.2% reported a year ago.
What Our Model Unveils
Our proven model doesn’t conclusively predict 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.
Earnings ESP: Masco has an Earnings ESP of -2.40%. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Stocks With Favorable Combination
Here are some companies in the Zacks Construction sector, which according to our model, have the right combination of elements to post an earnings beat for their respective quarters to be reported.
Boise Cascade Company BCC has an Earnings ESP of +2.36% and a Zacks Rank of 1.
BCC’s earnings for the to-be-reported quarter are expected to decline 53.7%. The company reported better-than-expected earnings in three of the last four quarters and missed on one occasion, the average surprise being 19%.
Owens Corning OC has an Earnings ESP of +1.11% and sports a Zacks Rank of 1.
OC’s earnings for the to-be-reported quarter are expected to decline 15.1%. The company reported better-than-expected earnings in the last four quarters, the average surprise being 15.1%.
Vulcan Materials Company VMC has an Earnings ESP of +2.22% and a Zacks Rank of 3.
VMC is expected to register a 24.8% increase in earnings for the to-be-reported quarter. Notably, the company reported better-than-expected earnings in two of the last four quarters and missed on the other two occasions, the average surprise being 7.1%.
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Masco Corporation (MAS) : Free Stock Analysis Report
Vulcan Materials Company (VMC) : Free Stock Analysis Report
Owens Corning Inc (OC) : Free Stock Analysis Report
Boise Cascade, L.L.C. (BCC) : Free Stock Analysis Report
