Masco Corporation (MAS) reported a loss of 8 cents per share (excluding special items) in the fourth quarter of 2010 in sharp contrast to a profit of 5 cents per share (excluding special items) in the same quarter of prior year.
The company’s loss was broader than the Zacks Consensus Estimate of a loss of 2 cents per share. Operating loss widened to $798 million from $197 million a year ago.
Masco’s results clearly reflect the challenging market conditions, including expiration of the home buyer tax credit, higher commodity costs and the competitive environment.
Sales in the quarter dipped 9% to $1.7 billion from $1.9 billion in the fourth quarter of 2009. The decline in sales reflected a 9% fall in North American sales and a 7% decrease in International sales. Except the Other Specialty Products segment, all the company’s segments reported a decline in revenues.
Sales in the Cabinets and Related Products segment fell 29% to $304 million; Plumbing Products decreased marginally by 1% to $661 million; Installation and Other Services slipped 7% to $273 million; and Decorative Architectural Products declined 4% to $336 million. Meanwhile, Other Specialty Products posted a 3% rise in sales to $161 million.
For full year 2010, Masco reported a profit of 16 cents per share that almost halved from 31 cents in 2009 due to the same factors explained above. Sales decreased 3% to $7.6 billion driven by a 3% fall in North American sales and flat International sales. The company posted an operating loss of $499 million compared with a profit of $55 million in 2009.
Masco had a cash balance of $1.72 billion as of December 31, 2010, an increase from $1.41 billion as of December 31, 2009. The company’s total debt amounted to $4.1 billion as on the above date. The debt-to-capitalization ratio stood at 72% as of the above date, up from 58% as of December 31, 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 for homebuyers. The company expects the challenging business environment to prevail in the first half of 2011.
Headwinds from foreclosure activities and restrained financial accessibility are other concerns. Further, the company has a significant exposure to its two principal customers, TheHome Depot (HD) and Lowe’s Companies(LOW). These factors lead to the company retaining a Zacks #3 Rank (Hold) on its stock.
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