Benefited by repair and remodel activity
Masco Corporation (NYSE:MAS) makes plumbing and decorative and architectural products, such as cabinets, paint, windows, and other home products under familiar brand names, sold for example at Home Depot. Currently around 75% of Masco’s top line is related to repair and remodel activity and the remaining 25% is derived from new home construction. Approximately 80% of the company’s sales are generated from operations in North America and 20% outside the US, mainly in Europe.
Even though the last economic crisis capped growth at Masco Corporation (NYSE:MAS), the company has recently implemented consolidation plans that will likely increase profitability. Forecasting an increase in renovation spending, the company has focused its improvement efforts on the Installation and Cabinet section. In addition, it has solidified its market position and leveraged its brands. By launching new products, reducing excessive costs and paying off its debt, Masco Corporation (NYSE:MAS)’s balance sheet will continue to strengthen.
Last quarter, earnings rose by 109.1% YoY driven by strong performance in the US, solid margin expansion, and profit improvement initiatives. Overall, the stock is attractive, especially given its ROE of 23.6% (TTM), compared to the 18.5% industry average return. Trading at about 39 times its trailing 12-month earnings (a 4% premium to the industry average of 37.2 times) while offering a moated brand, I would recommend Buying shares of Masco Corporation (NYSE:MAS).
CRH, Martin Marietta Materials, Inc. (NYSE:MLM) and Masco Corporation (NYSE:MAS) operate in an industry that holds key barriers to entry. All three stocks are expected to deliver strong growth figures in the future based on signs of an ongoing recovery in the residential and nonresidential construction activity. Follow the link to a great blog article to find other solid companies with good prospects and durable “moats”.
The article 3 Construction Stocks Capitalizing on the Recovery originally appeared on Fool.com and is written by Damian Illia.
Damian Illia has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
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