Masco Corporation (MAS) reported earnings of 5 cents per share (excluding special items) in the second quarter of 2011, deteriorating significantly from 16 cents (excluding special items) in the year-ago quarter.
Reported earnings also missed the Zacks Consensus Estimate of 8 cents per share. The continuous decline in the construction of new homes was primarily responsible for the company’s poor performance in the quarter.
Net sales dropped marginally to $2.02 billion from $2.05 billion in the prior year, mainly due to weakness in the new homes construction business, which was partly offset by strong sales of plumbing related products. However, it exceeded the Zacks Consensus Estimate of $1.98 billion.
Masco’s adjusted operating profit plunged significantly to $111 million (5.5% of sales) from $170 million (8.3% of sales) in the second quarter of 2010.
North American sales dipped 6% to $1.56 billion while international sales rose 18% to $459 million. In local currencies, international sales increased 5% from the second quarter of 2010.
Cabinets and Related Products sales fell 18% to $330 million; sales from Installation and Other Services slipped 5% to $294 million; Decorative Architectural Products dipped 3% to $492 million while sales from Other Specialty Products plummeted 5% to $145 million. However, sales from Plumbing Products witnessed a growth of 12% to $761 million.
Masco had a cash balance of $1.61 billion as of June 30, 2011, an increase from $1.38 billion in the prior-year period. The company’s total debt amounted to $4.09 billion as of June 30, 2011 compared with $4.10 billion as of June 30, 2010. Debt-to-capitalization ratio stood at 73% at the end of the second quarter of 2011 versus 61% at the end of the same quarter last year.
Masco’s earnings and sales in the second half of 2011 are expected to be hampered by the slowdown in new home construction, high cost of energy, growing unemployment and declining consumer confidence.
Moreover, growing competition will also aggravate the problem, adversely affecting prices and inhibiting growth opportunities. The company’s key competitors include Benjamin Moore, Glidden, The Sherwin-Williams Company (SHW), The Valspar Corporation (VAL) and Zinsser.
Keeping these in mind, the shares of Masco Corporation are maintaining a Zacks #5 Rank, which translates into a short-term “Strong Sell” rating. Alongside, the stock also has an “Underperform” recommendation for the long term.
MASCO (MAS): Free Stock Analysis Report
SHERWIN WILLIAM (SHW): Free Stock Analysis Report
VALSPAR CORP (VAL): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment