Masco Corp. Earnings Cheat Sheet: Margins Shrink For Fifth Straight Quarter

S&P 500 (NYSE:SPY) component Masco Corporation (NYSE:MAS) reported its results for the third quarter. Masco manufactures and installs building and home improvement products including faucets, cabinets, architectural coatings, and windows.

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Masco Earnings Cheat Sheet for the Third Quarter

Results: Reported a profit of $36 million (10 cents per diluted share) in the quarter. Masco Corporation had a net loss of $5 million or a loss 2 cents per share in the year earlier quarter.

Revenue: Rose 2.5% to $2.01 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: MAS reported adjusted net income of 8 cents per share. By that measure, the company fell in line with the mean estimate of 8 cents per share. Analysts were expecting revenue of $1.98 billion.

Quoting Management: “Our sales increased three percent compared to third quarter 2010, reflecting strong sales of plumbing-related products driven by share gains of our Hansgrohe and Delta brands, share gains in our Installation segment and foreign currency translation. The third quarter of 2011 was negatively impacted by continued depressed conditions in new home construction and by the deferral of “big ticket” repair and remodel activity,” said Masco’s President and CEO Tim Wadhams. “We have continued to take aggressive steps to address these challenging market dynamics and further reduce our cost structure. In October, we closed multiple facilities and reduced headcount in those businesses most affected by these economic conditions. In addition, we identified four businesses within the Installation and Other Services segment for divestiture. These businesses were focused on noncore diversified products which include framing, commercial drywall installation, and millwork.”

Key Stats:

Last quarter marked the fifth straight quarter that the company saw shrinking gross margins as gross margin fell 0.6 percentage point to 24.7% from the year earlier quarter. Over that time, margins have contracted on average 2.8 percentage points per quarter on a year-over-year basis.

A year-over-year revenue increase last quarter snaps a streak of four consecutive quarters of revenue declines. The worst quarter in that span was the fourth quarter of the last fiscal year, which saw a 7.2% decrease.

The company fell in line with estimates last quarter after missing the mark in the previous two quarters. In the second quarter, it fell short by 3 cents, and in the first quarter, it missed by 2 cents.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the fourth quarter has moved down from a profit of 3 cents a share to a loss of one cent over the last ninety days. The average estimate for the fiscal year is 7 cents per share, down from 19 cents ninety days ago.

Competitors to Watch: Fortune Brands, Inc. (NYSE:FO), American Woodmark Corp. (NASDAQ:AMWD), U.S. Home Systems, Inc. (NASDAQ:USHS), Patrick Industries, Inc. (NASDAQ:PATK), ALNO AG (AMEX:ANO), and Design Studio Furniture Manufacturer Ltd (D11).

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(Source: Xignite Financials)