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Solid Housing, Repair & Remodeling Activities Aid Masco (MAS)

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Masco Corporation MAS has been gaining strength from strong segmental performance backed by robust U.S. housing market fundamentals, and repair & remodeling activities. Also, inorganic moves and higher ROE have been adding to the positives.

Earnings estimates for the second quarter and full-year 2021 have edged up 1.9% and 8%, respectively, over the past 60 days. Although shares of Masco have underperformed the Zacks Building Products – Miscellaneous industry year to date, positive estimate revision signifies bullish analyst sentiments and justifies the company’s Zacks Rank #2 (Buy), indicating robust fundamentals and the expectation of outperformance in the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Masco also boasts a solid earnings surprise history, surpassing the Zacks Consensus Estimate in six of the trailing seven quarters.

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Driving Factors

Solid Performance: Masco — which shares space with Owens Corning OC, Otis Worldwide Corporation OTIS and Advanced Drainage Systems, Inc. WMS in the same industry — reported impressive results for first-quarter 2021. Both earnings and revenues surpassed the Zacks Consensus Estimate as well as improved year over year. Its earnings and revenues grew an impressive 89.3% and 24.6%, respectively, from the year-ago figures. Strong Decorative Architectural Products and North American Plumbing segments helped it deliver better-than-expected results.

Both of its reporting segments — Plumbing Products and Decorative Architectural Products — delivered impressive results, with revenues increasing 31% and 15%, respectively, in the last reported quarter.

Solid Housing Market Backdrop: Robust U.S. housing market fundamentals and repair & remodeling activities have been benefiting Masco. Housing markets have been showing resilience of late, given Fed’s dovish stance, low borrowing costs and lack of available supply. With the opening of the economy, demand for housing and building material products has been improving, given the increasing trend of consumers to invest more in homes amid the pandemic. Apart from the remarkable recovery in single-family housing construction, repair/remodel activity also has been robust, supported by do-it-yourself and professional activity.

Inorganic Moves: Masco continues to expand its portfolio with acquisitions. In first-quarter 2021, Masco acquired a 75.1% equity interest in Easy Sanitary Solutions B.V. ("ESS") for approximately $58 million. ESS is a manufacturer of shower channel drains, and offers a wide range of products for barrier-free showering as well as bathroom wall niches. Included in the Plumbing Products segment, ESS mainly focuses on innovation and design. The buyout will expand the company’s presence in the sanitary solutions business.

Superior ROE: Masco has a very strong return on equity (ROE) that is indicative of its growth potential. The company’s ROE currently stands at 361.4%. This compares favorably with ROE of 10.8% for the industry it belongs to. This indicates efficiency in using shareholders’ funds and its ability to generate profits with minimum capital usage.

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Masco Corporation (MAS) : Free Stock Analysis Report

Advanced Drainage Systems, Inc. (WMS) : Free Stock Analysis Report

Owens Corning Inc (OC) : Free Stock Analysis Report

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