Slowing Demand Tempers Masco’s Q4 and FY 2022 Outlook; Our Long-Term Forecast Remains Intact

Masco's stock price declined over 5% on Oct. 26 after the wide-moat-rated building products manufacturer released disappointing third-quarter results and moderated its full-year 2022 financial outlook. Revenue of $2.2 billion was unchanged compared to the year-ago quarter as a 9% increase in price was offset by a 6% volume decline and a 3% sales decline tied to currency translation. Volume and currency headwinds were more severe than we had expected (we had modeled roughly 6% third-quarter revenue growth). However, we were more disappointed by Masco's profit margin, which substantially underperformed our projection (15.9% versus our 18.2% forecast). Lower volumes, higher operational costs, and currency headwinds more than offset the favorable margin effect from higher selling prices. Management now expects full-year revenue growth of 3%-4% (5%-7% previously) and adjusted EPS of $3.70-$3.80 ($4.15-$4.25 previously).