Just a few short years ago, the housing market was arguably the deadliest industry for an investment. However, the industry has showed immense strength lately and the companies within it have been propelled back into growth mode. One of the largest beneficiaries of this rebound is Masco Corporation (NYSE:MAS) which is about to report fourth-quarter earnings. Let's take a look and see if we should buy Masco's stock going into the report or if we should wait to see what the company has to say.

The building products giant
Masco is a manufacturer and distributor of home improvement and building products, with the majority of its business in North America and Europe. It operates in five main segments:

  • cabinetry and related products
  • plumbing products
  • decorative architectural products
  • installation and services
  • other products

Masco has become one of the premier building products providers in the United States, mainly because it is one of the largest suppliers to Home Depot (NYSE:HD) and Lowe's (NYSE:LOW).

Source: Masco

The last time out
On Oct. 28, Masco released third-quarter results for fiscal 2013. The report exceeded analyst expectations on both the top and bottom lines:

Metric Reported Expected
Earnings per share $0.27 $0.25
Revenue $2.15 billion $2.10 billion

Masco's earnings per share grew 92.9% and revenue rose 12.4% year over year, driven by sales increases in all of the company's segments. The company's gross margin expanded 120 basis points to 28.5%, which marked the eighth consecutive quarter of both sales growth and margin expansion. Management noted the strength in new home construction and a rise in home improvement and repairs as the primary drivers for the great performance in the quarter, and I believe this will carry over into the fourth quarter.

Expectations and what to watch for
Masco's fourth-quarter results are due out after the market closes on Feb. 10 and the current expectations call for another quarter of top- and bottom-line growth. Here's an overview of the current estimates: 

Metric Expected Year-Ago
Earnings per share $0.17 $0.04
Revenue $1.99 billion $1.89 billion

These expectations call for Masco's earnings to increase by an impressive 325% and revenue to rise by 5.3% year over year. Other than these key metrics, I would like to see Masco show another quarter of margin improvement and give a positive forecast on the housing market. Also, I would like Masco's management to provide guidance for fiscal 2014 that is within Wall Street's estimates; the current expectations call for earnings per share to be in the range of $0.90-$1.30 on revenue of $8.5 billion-$9.4 billion. If Masco delivers on all of this, and I think it will, the stock will likely see a large move to the upside and provide investors with a positive outlook for the year ahead.

Supplying the giants
As mentioned before, Masco is one of the largest suppliers to Home Depot and Lowe's. Home Depot is the largest home-improvement retailer in the world with 2,260 locations in the United States, Puerto Rico, U.S. Virgin Islands, Canada, Mexico, and Guam. Lowe's is the second-largest home-improvement retailer with 1,831 locations in the United States, Canada, and Mexico.

Source: Behr

Masco's 2012 annual report showed that Home Depot was responsible for approximately 28% of its total sales and Lowe's was responsible for about 10% of its total sales, and I believe these numbers will be even higher in the 2013 report due out shortly. I believe Home Depot is the most important of Masco's partners, due to its exclusive agreement to sell Behr paints and the fact that it is much larger than Lowe's. Both Home Depot and Lowe's will report earnings in the coming days, so use Masco's earnings as an industry blueprint for what those reports may hold.

The Foolish bottom line
Masco is in a great position to continue its growth and recovery from the dark days of the housing collapse. It is about to report fourth-quarter results and the current estimates call for immense earnings growth, and I believe the company can meet these expectations. Keep a close eye on Masco and consider initiating a position on any weakness going into the report or on any significant decline following it.