Masco Corporation (MAS) showed a decline in profit to $37 million or 11 cents per share (before special items) in the third quarter of the year from $63 million or 18 cents per share (before special items) in the year-ago quarter. However, the company has beaten the Zacks Consensus Estimate by a penny during the quarter.
Sales in the quarter slid 6% to $1.96 billion, lower than the Zacks Consensus Estimate of $2.05 billion. Sales in both North America and in the International markets fell 6% from the year-ago level. Operating profit (before special items) decreased to $141 million (7.2% of sales) from $166 million (8% of sales) a year ago.
The deterioration in sales and profit was attributable to sluggish new home construction on top of a lower consumer spending. Except the Plumbing Products segment, all the company’s segments reported a decline in revenues.
Sales in the Cabinets and Related Products segment fell 18% to $357 million; Installation and Other Services declined 12% to $292 million; Decorative Architectural Products slipped 2% to $463 million; and Other Specialty Products dipped 4% to $159 million.
Meanwhile, Plumbing Products sales rose marginally by 1% to $686 million, driven by strong sales in the international markets, as Hansgrohe – a leading manufacturer of decorative plumbing products for the kitchen and bath that is controlled by Masco – continues to expand globally.
Masco had a cash balance of $1.54 billion as of September 30, 2010, an increase from $1.41 billion as of December 31, 2009. The company’s total debt amounted to $4.1 billion in the above period. The debt-to-capitalization ratio stood at 60% as of the above date, up from 58% as of December 31, 2009.
Masco has reiterated its housing starts guidance for 2010. The company expects housing starts in 2010 to increase to a range of 575,000 to 625,000 units from 554,000 units in 2009.
Masco’s earnings and sales continued to be hampered by the slowdown in new home construction, particularly after the expiration of federal tax credit toward homebuyer. To this, adds headwinds from foreclosure activities and limited financial accessibility.
Further, the company has significant exposure to its two principal customers, The Home Depot (HD) and Lowe’s Companies (LOW). These factors have led the company retain a Zacks #4 Rank (Sell) on its stock.
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