Here's How Masco Shocked the Market This Week
Key Points
Profit growth was driven by price increases and cost control.
Masco is well-insulated from online competition and housing market weakness.
Shares in plumbing and paints company Masco (NYSE: MAS) rose by 13.2% in the week to Friday morning. The move comes after a surprisingly strong set of first-quarter 2026 earnings was released earlier in the week.
Masco bucks the trend
A combination of soaring raw material prices and the absence of a significant recovery in the housing market and weak consumer market is creating what Masco's management describes as "a dynamic macroeconomic and geopolitical environment." Still, you wouldn't know it from looking at the company's first quarter 2026 results.
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Company sales rose 4% in local currency to $1.92 billion in the quarter, with an impressive increase in operating profit margin to 16.9% from 16% in the same quarter of 2025. Given that the adjusted gross profit margin was flat at 36%, the increase in operating profit clearly came from keeping sales, general, and administrative (SG&A) costs under control at $366 million, compared to $358 million in last year's first quarter.
In short, the excellent results were achieved by increasing prices and controlling SG&A expenses. In addition, Masco is relatively well-positioned in the housing products market because 84% of its plumbing sales go to the repair-and-remodel market, and 100% of its paint sales go to the same market. Repair-and-remodel sales tend to be less cyclical than sales in the new housing market.
In addition, the nature of its products means it's relatively insulated from low-cost online competition, not least because paint is difficult to transport and consumers like to see and feel faucets and other plumbing supplies in showrooms.
Image source: Getty Images.
Where next for Masco?
Masco's management acknowledged that it's facing higher-than-expected costs in 2026, and expects sales to increase at a low single-digit rate. Full-year earnings per share guidance was maintained at $4.10 to $4.30, putting the stock on slightly less than 18 times the midpoint of 2026 earnings. That looks like a fair valuation.
Lee Samaha has no position in any of the stocks mentioned. The Motley Fool recommends Masco. The Motley Fool has a disclosure policy.