Masco Corporation (MAS) witnessed a loss of 5 cents per share (excluding special items) in the first quarter of 2011 in contrast to a profit of 3 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 3 cents per share. It was attributable to poor North American sales during the quarter, partially due to expiration of homebuyer tax credit in mid-2010.
Net sales fell 4% to $1.77 billion, which was in line with the Zacks Consensus Estimate. Except Plumbing Products and Other Specialty Products segment, all the company’s segments reported a decline in revenues. Operating profit (adjusted) went down significantly to $53 million (3% of sales) from $93 million (5% of sales) in the first quarter of 2010.
North American sales dipped 7% to $1.33 billion while international sales rose 4% to $439 million. In local currencies, international sales increased 5% from the first quarter of 2010.
Sales in the Cabinets and Related Products segment fell 24% to $307 million; Installation and Other Services slipped 7% to $254 million and Decorative Architectural Products declined 4% to $375 million. Meanwhile, sales in Plumbing Products and Other Specialty Products rose 7% to $710 million and 2% to $126 million, respectively.
Masco had a cash balance of $1.51 billion as of March 31, 2011, an increase from $1.38 billion in the corresponding period of prior year. The company’s total debt amounted to $4.1 billion as of the above date compared with $4.17 billion as of March 31, 2010. The debt-to-capitalization ratio stood at 72.5% as of the above date, up from 61% as of March 31, 2010.
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. The company expects the second half of 2011 to be stronger than the first half.
To this, adds headwinds from foreclosure activities and restrained financial accessibility. Further, the company has a 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#5 Rank, which translates to a short term (1–3 months) rating of “Strong Sell” and we have reiterated our long term (more than 6 months) recommendation of “Underperform”.
HOME DEPOT (HD): Free Stock Analysis Report
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