Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why Shares of Masco Rose 11% in October

By John Bromels - Nov 9, 2019 at 10:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The manufacturer of top home improvement brands posted solid growth.

What happened

Shares of home improvement product manufacturer Masco ( MAS 0.36% ) were up 11% in October, according to data provided by S&P Global Market Intelligence. The share price rose steadily throughout the month, outpacing the S&P 500's 2% growth, but really jumped after the company reported strong third-quarter earnings on Oct. 30. 

This continued an impressive winning streak for Masco, whose shares are up 58.4% so far this year.

A man and a woman roll blue paint onto a wall.

Strong growth in Masco's paint business helped it outperform in Q3. Image source: Getty Images.

So what

Masco manufactures a diverse group of home improvement brands, including Behr paint, Delta faucets, Kichler lighting, and HotSpring spas. The company is in the process of divesting its cabinetry business as well as its windows and doors business. Business was booming in Q3, and Masco reported solid results across the board.

Revenue grew by 2% year over year to $1.9 billion; gross margin increased by 150 basis points, to 34.2%; and operating profit grew by 10% year over year, to $316 million. The company also repurchased 3.8 million shares during the quarter and increased its 2019 guidance for earnings per share by $0.11, to a range of $2.52 to $2.56 per share. The company also successfully divested its U.K. windows business and signed an agreement to sell its Milgard brand of windows and doors. 

With everything coming up roses for Masco, it's easy to see why investors bid up the stock. 

Now what

Even with the company's big price run-up, Masco is still trading at just 20.2 times earnings, which is toward the low end of its historic range and also at the low end of the sector, so from a valuation standpoint, the stock still looks compelling.

However, because Masco depends on home renovations and new home construction for its sales, it's the opposite of a recession-resistant company. New homes, renovations, and spa installations are easy purchases to delay in the event of an economic downturn, so investors should be aware of the recession risks that come with this otherwise strong company.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Masco Corporation Stock Quote
Masco Corporation
MAS
$68.85 (0.36%) $0.25
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$4,701.21 (0.31%) $14.46

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
652%
 
S&P 500 Returns
142%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/08/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.