I think it’s important for investors to always look at the big picture and then see which companies will benefit. We are still in the early stages of the housing recovery and the obvious choice is the home builders. The problem is that there are many home builders and it’s tough to determine which one is the best choice for your portfolio. I would much rather focus on what goes into a new home. The companies that supply home builders with kitchen cabinets and bathroom fixtures will benefit as all home developers turn to these companies to finish their homes.
The supplier the builders call
Masco Corporation (NYSE:MAS) is one of the world’s largest manufacturers of brand-name products for the home improvement and new-home construction markets. Masco Corporation (NYSE:MAS) is comprised of over 20 companies with 60 manufacturing facilities in the U.S. and over 20 in other parts of the globe. The company’s business segments include cabinetry, plumbing products, installation, decorative products like paint and primer, and specialty products such as windows and doors. Its divisions include Masco Corporation (NYSE:MAS) Cabinetry, Delta Faucets, Masco Bath, Masco Contractor Services, Behr Paint, and Arrow Fasteners.
In the first quarter, operating income rose 19% to $140 million. Operating margins were the highest since 2007 at 7.5%. Earnings came in at $0.13 per share, but missed estimates by $0.01. Earnings improved by 85% compared to the same quarter in the prior year. Results improved because of the housing recovery in North America, the company’s turnaround efforts and cost savings. Net sales rose 3.9% to $1.9 billion.
Masco Corporation (NYSE:MAS) expects continued improvement in the North American market for the rest of 2013. Repair and remodeling improvements are expected to pick up along with new-home construction. Last year, the company estimated that 75% of its revenue came from home repair and remodels and 25% from new construction. Prior to the housing crash, the mix was 55% home repair and remodels and 45% new-home construction. Margins are higher in new construction for Masco Corporation (NYSE:MAS) and an increase in housing starts is a positive.
You might make a fortune with this company
Fortune Brands Home & Security Inc (NYSE:FBHS) is best known for its doors, windows, locks, faucets and cabinets. Its brands include Master Lock, MasterBrand cabinets, Moen faucets, Simonton windows, and Therma-Tru doors.
In the first quarter, net sales increased 11% to $890 million. Earnings were $0.22 per share compared to $0.08 in the prior year. The company also purchased WoodCrafters Home Products, a leading manufacturer of bathroom vanities. It also paid its first quarterly dividend. The plumbing and accessories division was the strongest segment for the company, with sales increasing 26%.
Fortune Brands Home & Security Inc (NYSE:FBHS) expects sales to increase 9% to 11% for this year. The company expects earnings to be in the range of $1.23 to $1.33 per share compared to $0.89 last year. The acquisition of WoodCrafters will add $230 million in revenue as well as give the company manufacturing facilities in Texas and Mexico. This acquisition further strengthens Fortune Brands Home & Security Inc (NYSE:FBHS)’ position in kitchen and bath cabinets.