Tags: Masco | housing | bottom | MAS

Masco Could Turn If Housing Bottoms and Reverses

By    |   Monday, 07 May 2012 05:27 PM

Masco (MAS) is a maker of home products used by builders to finish construction. Because of the recent huge decline in new home construction, the stock quite naturally has lagged the broader market. That could turn around, however, if housing demand bottoms and reverses.

Masco manufactures, distributes and installs home improvement and building products. Besides installing products of other makers, it is among the largest manufacturers in North America of a number of home improvement and building products, including faucets, cabinets, architectural coatings and windows, and it is one of the largest installers of insulation for the new home construction market.

Approximately 76 percent of 2011 sales were generated by North American operations. As a result of the decline in demand, Masco management has taken “significant” actions, it says, to downsize.

“We have been focused on the strategic rationalization of our businesses, including business consolidations, plant closures, headcount reductions, system implementations and other initiatives,” management told investors in a recent filing.

The company sees full-year 2012 rationalization charges of approximately $20 million. “We continue to evaluate our businesses and the impact of market conditions on our businesses, which may result in additional rationalization charges including severance, plant closure costs and asset impairments,” Masco management said.

The company has a market cap of $5.14 billion in a sector, building products, where the average company size is $442.7 million. Its projected earnings per share growth for the coming year is 133.33 percent, higher than the sector average at 56.41 percent.

Positive impact

Analysts are bearish on Masco, with a large cohort of neutral ratings and several sell or underperform calls, including from Raymond James and Thomas White International. Standard & Poor’s, however, rates the stock at outperform.

“MAS has been hurt for an extended period by very soft U.S. housing and home improvement markets. Yet, we see its business starting to revive over the next year on global economic growth and its likely positive impact on home improvement and housing markets,” S&P analysts wrote in a recent report. “We view the shares as undervalued.”

Masco next reports in late July.

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Monday, 07 May 2012 05:27 PM
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