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Masco Corp MAS

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Morningstar’s Analysis

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Masco Reported Surprisingly Strong Q1 Results, but Sees Q2 Sales Plunging 20%-25% Due to COVID-19

Analyst Note

| Brian Bernard, CFA, CPA |

Masco's first-quarter performance came in stronger than we had anticipated; revenue grew approximately 4% year over year to almost $1.6 billion, adjusted operating margin expanded 80 basis points to 14.4%, and adjusted EPS from continued operations increased 24% to $0.46. However, Masco's strong first-quarter results will prove to be the calm before the coronavirus storm. Management said on the earnings call that they are expecting consolidated second-quarter sales to decline 20%-25% year over year, with plumbing sales down 30%-35% and decorative architectural sales 5%-10% lower than the prior-year quarter. With such a drastic sales contraction, management expects decremental margins of 40%-45% during the second quarter and approximately 35% for the full year. This 2020 outlook is about in line with our revised expectations, which we published on April 3. We've maintained our $49 per share fair value estimate for this medium uncertainty stock.

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Company Profile

Business Description

Masco is a global leader in home improvement and building products. The company’s $4 billion plumbing segment, led by the Delta and Hansgrohe brands, sells faucets, showerheads, and other related plumbing components. The $2.7 billion decorative architectural segment primarily sells paints and other coatings under the Behr and Kilz brands. Masco sold its Milgard and U.K. windows businesses in 2019 for more than $725 million and sold its cabinetry business for $1 billion in first quarter 2020.

Contact
17450 College Parkway
Livonia, MI, 48152
T +1 313 274-7400
Sector Industrials
Industry Building Products & Equipment
Most Recent Earnings Mar 31, 2020
Fiscal Year End Dec 31, 2019
Stock Type Slow Growth
Employees 22,000

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