Research

MAS – Market expectations are for Uniform ROA to reach new peaks, but management may have concerns about sales, their supply chain, and demand

September 28, 2020
  • Masco Corporation (MAS:USA) currently trades near historical averages relative to UAFRS-based (Uniform) earnings, with an 18.3x Uniform P/E. At these levels, the market has bullish expectations for the firm, while management may have concerns about sales declines, supply chain disruptions, and demand recovery
  • Specifically, management may lack confidence in their ability to mitigate pro paint sales declines, manage through the pandemic, and control costs as demand improves. Moreover, they may have concerns about supply chain disruptions, the sustainability of the demand recovery seen in June, and the volatility and variability in their sales guidance. Furthermore, they may lack confidence in their ability to capitalize on the structural shift in the DIY market and sustain Kichler and Liberty product growth. Additionally, they may be exaggerating the strength of their capital allocation and they may be downplaying concerns about supply chain disruptions. Finally, they may lack confidence in their ability to generate wins during the recovery and serve their customers through the summer months, and may be exaggerating propane demand improvements