Masco Earnings: Gross Margin Surprisingly Strong; Full-Year Guidance Could Prove Conservative

Considering the downbeat 2023 guidance Masco issued with its fourth-quarter earnings release, we were anticipating a challenging first quarter for the wide-moat-rated building products manufacturer. Sales of approximately $2 billion were 10% lower than the year-ago quarter, primarily due to a 14% volume decline that was partially offset by a 6-percentage-point increase in net selling prices. Masco enjoyed a favorable price/cost spread during the first quarter, which caused adjusted gross margin to expand 150 basis points to 33.6%. Masco’s gross margin exceeded our expectations and was the primary reason the firm’s adjusted EPS of $0.87 handily beat the $0.63 FactSet consensus estimate.