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Why Masco (MAS) Stock Is Falling Today

NEW YORK (TheStreet) -- Masco (MAS) was falling -11.3% to $19.92 Friday after missing analysts' expectations for earnings in the first quarter.

For the first quarter Masco reported earnings of 15 cents a share, missing analysts' estimates of 17 cents a share by 2 cents. Revenue grew 4.3% year-over-year to $1.96 billion in the quarter. Analysts surveyed by Thomson Reuters expected revenue of $2 billion for the first quarter.

In the earnings report Masco president and CEO Keith Allman said that housing starts decelerated in the second half of 2013, which had an impact in the first quarter. Poor winter weather in North American also hurt the company's sales and profitability in the quarter.

"Despite these obstacles, we continued to grow our top line, with particular strength in our Plumbing Products, Installation and Other Services and Other Specialty Products segments," Allman said. "We continue to make progress as we work to execute the turnaround of our cabinetry business. Cabinet sales to builders and dealers increased modestly this quarter."

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TheStreet Ratings team rates MASCO CORP as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate MASCO CORP (MAS) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, good cash flow from operations, increase in stock price during the past year and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • MAS's revenue growth has slightly outpaced the industry average of 3.1%. Since the same quarter one year prior, revenues slightly increased by 9.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • MASCO CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, MASCO CORP turned its bottom line around by earning $0.79 versus -$0.16 in the prior year. This year, the market expects an improvement in earnings ($1.10 versus $0.79).
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Building Products industry and the overall market, MASCO CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly increased by 54.45% to $295.00 million when compared to the same quarter last year. In addition, MASCO CORP has also vastly surpassed the industry average cash flow growth rate of -4.94%.
  • You can view the full analysis from the report here: MAS Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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