Masco Corporation MAS reported better-than-expected results for third-quarter 2021. Earnings and net sales surpassed their respective Zacks Consensus Estimate. On a year-over-year basis, net sales improved on strong demand across the categories and channels but adjusted earnings declined owing to supply chain constraints and inflation.

The company’s shares jumped 3.1% in the pre-market trading session on Oct 27.

Masco’s president and CEO, Keith Allman, said, “Our team effectively navigated supply chain challenges to deliver for our customers while successfully implementing pricing and cost productivity actions to offset persistent inflation. We also advanced our capital deployment strategy by returning approximately $186 million to shareholders in the form of dividends and share repurchases, bringing our year-to-date total dividends and share repurchases to $1.0 billion."

Inside the Headlines

Masco’s adjusted earnings came in at 99 cents per share, which topped the consensus mark of 87 cents by 13.8% but declined 6.6% from the year-ago figure of $1.06.

Masco Corporation Price, Consensus and EPS Surprise

Masco Corporation price-consensus-eps-surprise-chart | Masco Corporation Quote

Net sales of $2,204 million topped the consensus estimate of $2,104 million by 4.7% and increased 11.1% from the prior-year quarter. Net sales jumped 9% year over year in local currency, excluding acquisitions and divestitures. Sales in the North American region increased 9% from the prior-year figure and 15% internationally, in local currency.

Segmental Analysis

Plumbing Products: Sales in the segment rose 16% year over year to $1,329 million. In local currency, the segment’s sales (excluding acquisitions and divestitures) increased 13% year over year. Yet, adjusted operating margin contracted 510 basis points (bps) year over year to 18.7%. Adjusted EBITDA decreased 6.2% year over year to $274 million.

Decorative Architectural Products: The segment reported sales of $875 million, up 4% from the prior-year period and 3% excluding acquisitions. Adjusted operating margin declined 240 bps to 19%. Adjusted EBITDA also decreased 8.4% from the prior-year period to $174 million.

Margins Performance

Adjusted gross margin contracted 380 bps from the prior year to 34.2%. Selling, general and administrative expenses — as a percentage of net sales — were up 20 bps to 16.7% from the year-ago figure.

Adjusted operating margin contracted 390 bps on a year-over-year basis to 17.5%. Adjusted EBITDA also fell 8.1% year over year to $421 million.

Financials

As of Sep 30, 2021, the company had cash and cash investments of $854 million compared with $1,326 million recorded at 2020-end. Long-term debt was $2.95 billion, up from $2.79 billion at 2020-end. Net cash for operating activities was $595 million for the first nine months of 2021 compared with $573 million in the comparable year-ago period.

2021 Projections Lifted

Based on a strong performance for the first three quarters and solid demand throughout the business, Masco lifted earnings projection. Adjusted earnings are now projected within $3.67-$3.73 per share, up from the prior expectation of $3.65-$3.75. This indicates nearly 19% growth from the 2020 level.

Zacks Rank & Peer Release

Masco — which shares space with Gibraltar Industries, Inc. ROCK and Armstrong World Industries, Inc. AWI in the Zacks Building Products - Miscellaneous industry — currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Otis Worldwide Corporation OTIS reported solid results for third-quarter 2021. Its earnings and revenues surpassed the respective Zacks Consensus Estimate as well as improved on a year-over-year basis. Solid organic sales in both New Equipment and Service segments along with higher operating margins benefited the company.

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