Masco Hits 52-Week High - Analyst Blog

On Mar 7, 2014, Masco Corporation MAS reached a 52-week high of $23.73 on strong fourth-quarter fiscal 2013 results announced on Feb 11. Masco carries a Zacks Rank #3 (Hold).

Share Price Drivers

Share price of Masco has been gaining momentum from the steady improvement in the construction industry. Masco is thus seeing a concomitant rise in demand and volume for its home improvement products like Delta faucets, Behr paint and Milgard windows.

Despite missing the Zacks Consensus Estimate, Masco's fourth-quarter earnings of 15 cents per share increased a massive 150% year over year. Strong revenues, solid margin expansion, cost controls and better operating leverage led to the earnings growth.

Moreover, revenues went up 9.1% year over year while beating the Estimate despite difficult year-ago comparisons, driven by volume growth.

Volumes benefited from new products/programs launches; increased new home construction activity and improvement in repair/remodel activity in North America; and increased outside U.S. sales due to improvement in Europe. In fact, in the second half of 2013, the company saw some traction in consumer spending on large ticket home improvements after struggling in the past few quarters.

Gross margins improved 100 basis points (bps) while operating margins grew 210 bps helped by strong revenues and solid cost controls. Both Installation and Cabinetry segments once again recorded strong profitability in the quarter. Both the segments returned to profitability in the second quarter of 2013 driven by the company's strategic initiatives and gaining from the housing recovery after the poor performance in 2012.

Overall, we are encouraged by Masco's continued focus on product innovation and cost improvements. The company is also divesting its less profitable and underperforming assets to focus more on its core areas. During 2014, the company expects further momentum in new home construction and repairs and remodel activity in North America and international markets.

Other Stocks to Consider

Other stocks in the building/construction sector that are doing well include CaesarStone Sdot-Yam Ltd. CSTE, Wolseley plc (WOSYY) and USG Corp. USG.  While CaesarStone enjoys a Zacks Rank #1 (Strong Buy), the other two carry a Zacks Rank #2 (Buy).