Company Reports

Masco is a global manufacturer of branded home improvement products. It operates through two segments: plumbing products (70% of sales) and decorative architectural products (30% of sales). The plumbing products segment includes bath and kitchen fixtures (such as faucets, showerheads, water filtration systems, etc.) sold under brands such as Delta and Hansgrohe, with demand largely tied to replacement and upgrade cycles. The decorative architectural products segment is centered around its Behr paint brand, which is sold primarily through an exclusive relationship with Home Depot and is more exposed to do-it-yourself, or DIY, driven spending, although the company has recently been expanding its presence with professional painters. Together, these businesses increase Masco’s exposure to repair and remodel activity, which tends to be less cyclical than new construction.

Masco reported a 3% decline in second-quarter revenue, as plumbing sales fell 3% and decorative architectural sales declined 4%. Management reinstated its 2026 revenue guidance, forecasting a low-single-digit increase, and raised adjusted EPS guidance by 7% at the midpoint to $4.40-$4.60 per share.

We are transferring coverage of Masco, a global manufacturer of branded home improvement products. The company’s portfolio focuses on lower-ticket, relatively nondiscretionary categories such as decorative paint and plumbing fixtures.

Masco is a global manufacturer of branded home improvement products. It operates through two segments: plumbing products (70% of sales) and decorative architectural products (30% of sales). The plumbing products segment includes bath and kitchen fixtures (such as faucets, showerheads, water filtration systems, etc.) sold under brands such as Delta and Hansgrohe, with demand largely tied to replacement and upgrade cycles. The decorative architectural products segment is centered around its Behr paint brand, which is sold primarily through an exclusive relationship with Home Depot and is more exposed to do-it-yourself, or DIY, driven spending, although the company has recently been expanding its presence with professional painters. Together, these businesses increase Masco’s exposure to repair and remodel activity, which tends to be less cyclical than new construction.

Masco reported a strong set of numbers in the first quarter that were better than the market's expectations. The firm reported adjusted EPS of $1.04 per share, 20% higher on a year-over-year basis as the US repair and remodel market showed some signs of improvement.

The stalled US repair and remodel market dragged Masco's fourth-quarter organic revenue down another 3% year over year while tariffs eroded adjusted operating margin 210 basis points to 13.8%. Management expects restructuring to help rebuild operating margins in 2026.

Masco almost entirely refreshed its senior executive management team in 2014. Since then, it has taken significant measures to build a stronger and more consistent business model. The firm divested its most cyclical and least profitable businesses (it spun off its installation business, now named TopBuild, to shareholders in 2015 and sold its windows and cabinetry businesses in 2019 and 2020, respectively). Management also executed significant cost-reduction initiatives and shored up the firm's balance sheet.

The US repair and remodel market has yet to turn the corner, and Masco's third-quarter organic revenue declined 2% year over year. Tariffs overcame pricing actions in the quarter, and adjusted operating margin fell 190 basis points to 16.3%. Management sees $60 million more in tariff costs in 2025.

Masco almost entirely refreshed its senior executive management team in 2014. Since then, it has taken significant measures to build a stronger and more consistent business model. The firm divested its most cyclical and least profitable businesses (it spun off its installation business, now named TopBuild, to shareholders in 2015 and sold its windows and cabinetry businesses in 2019 and 2020, respectively). Management also executed significant cost-reduction initiatives and shored up the firm's balance sheet.

Despite a soft demand environment, Masco reported flat second-quarter organic sales growth, accompanied by a 100-basis-point increase in adjusted operating margin. Management reinstated 2025 guidance, expecting roughly flat organic sales growth and adjusted EPS of $3.90-$4.10 versus $4.10 last year.

Masco almost entirely refreshed its senior executive management team in 2014. Since then, it has taken significant measures to build a stronger and more consistent business model. The firm divested its most cyclical and least profitable businesses (it spun off its installation business, now named TopBuild, to shareholders in 2015 and sold its windows and cabinetry businesses in 2019 and 2020, respectively). Management also executed significant cost-reduction initiatives and shored up the firm's balance sheet.

Masco's first-quarter organic revenue declined 3% year over year and adjusted operating margin narrowed 70 basis points to 16.0%. Management estimates annualized tariff costs of about $675 million (9% of 2024 sales) but has already implemented mitigation actions.

Masco almost entirely refreshed its senior executive management team in 2014. Since then, it has taken significant measures to build a stronger and more consistent business model. The firm divested its most cyclical and least profitable businesses (it spun off its installation business, now named TopBuild, to shareholders in 2015 and sold its windows and cabinetry businesses in 2019 and 2020, respectively). Management also executed significant cost-reduction initiatives and shored up the firm's balance sheet.

On April 2, President Donald Trump announced sweeping tariffs, with a minimum 10% tariff on all US imports and higher tariff rates for select countries. Masco's stock price fell 10% on April 3, worse than the Morningstar US Industrials Index's 6% decline.

Masco almost entirely refreshed its senior executive management team in 2014. Since then, it has taken significant measures to build a stronger and more consistent business model. The firm divested its most cyclical and least profitable businesses (it spun off its installation business, now named TopBuild, to shareholders in 2015 and sold its windows and cabinetry businesses in 2019 and 2020, respectively). Management also executed significant cost-reduction initiatives and shored up the firm's balance sheet.

Masco delivered a solid fourth-quarter performance despite sluggish end markets. Excluding the Kichler divestiture and unfavorable currency, sales increased 1% year over year and adjusted operating margin expanded 140 basis points to 15.9%. Management is targeting 2%-9% EPS growth in 2025.

It was an uneventful third quarter for Masco. Revenue growth was roughly flat year over year but adjusted operating margin expanded 60 basis points to 18.2%. Management's 2025 guidance was mostly unchanged even though the do-it-yourself paint market has been weaker than anticipated.

On Sept. 3, Masco announced it has entered into a definitive agreement with Kingswood Capital Management to sell its Kichler lighting business for $125 million, a steep markdown from the $550 million Masco paid to acquire Kichler in March 2018. We never believed Kichler was a moatworthy business, and, in our view, it has generally struggled since its acquisition. Indeed, Masco recorded a tradename impairment charge in 2019 and a larger goodwill impairment charge in 2022. That said, Masco’s restructuring efforts likely leave the business in a better position, currently. Even so, we’re glad Masco is moving on from this business. While not a huge needle-mover at approximately 3% of consolidated revenue, we expect Masco’s decorative architectural segment profit margins will noticeably improve after the lower-margin Kichler business is sold. After incorporating the divestiture into our valuation model, we’ve maintained our $82 per share fair value estimate. Management expects the sale to close before the end of 2024.

We think Masco’s financial performance over the past decade has been as much of a self-help story as a story of improving end markets. Masco almost entirely refreshed its senior executive management team in 2014. Since then, it has taken significant measures to build a stronger and more consistent business model. The firm divested its most cyclical and least profitable businesses (it spun off its installation business, now named TopBuild, to shareholders in 2015 and sold its windows and cabinetry businesses in 2019 and 2020, respectively). Management also executed significant cost-reduction initiatives and shored up the firm's balance sheet.

We think Masco’s financial performance over the past decade has been as much of a self-help story as a story of improving end markets. Masco almost entirely refreshed its senior executive management team in 2014. Since then, it has taken significant measures to build a stronger and more consistent business model. The firm divested its most cyclical and least profitable businesses (it spun off its installation business, now named TopBuild, to shareholders in 2015 and sold its windows and cabinetry businesses in 2019 and 2020, respectively). Management also executed significant cost-reduction initiatives and shored up the firm's balance sheet.