Resurgent Housing Sector Favors Masco Corporation (MAS)

Opportunities from Reconstruction

Potential short-to medium-term gains for Masco as well as Home Depot can likewise be expected from spending on home reconstruction efforts in the northern states devastated by superstorm Sandy last year. In New Jersey, for instance, it is expected that the U.S. Senate will soon pass a bill authorizing $51 billion in Hurricane Sandy federal disaster aid. Notably, home reconstruction and home replacement are covered in the government financial assistance to the hurricane victims. This assistance, which also covers temporary housing, is being facilitated via the Federal Emergency Management Agency.

The state’s largest builder, Hovnanian Enterprises, Inc. (NYSE:HOV), is among the companies well-positioned to explore the construction opportunities that will be opened by this federal allocation. Hurricane Sandy had minimal adverse effects on Hovanian’s operations itself, despite completion of some deals being pushed back by the superstorm. The company reported that its revenue rose 43% to $487 million for the quarter ended Oct. 31, 2012. Its net contracts rose 23% to 1,443 homes from the year-earlier period, while contract backlog, a future sales indicator, was up 29% to 2,145. Its net loss for the quarter narrowed to $84.4 million, or $0.59, from the $98.3 million, or $0.90, posted a year ago. Repurchase of debt amounting to $87 million was factored in this quarter’s results.

Added Boost from New Masco Products

Given the robust fundamentals of the U.S. housing industry, taking a strong position in Masco appears warranted as the company is well positioned to further improve its bottom line. The company reported adjusted earnings per share of $0.04 for the 2012 fourth quarter, a reversal of the $0.09 loss in the year-ago period and well ahead of some analysts’ forecast of a $0.01 loss. Its $1.9 billion net sales during the quarter, which rose 9% from $1.7 billion year-over-year, were also above market expectations of $1.81 billion. Higher sales and operating margins, particularly in its North American operations, propelled this turnaround.

Further gains can likewise be stimulated by Masco’s continuing innovation and introduction of several new products which the company hopes will bring in over 30% contribution to total revenues this year. These recent launches include those in the product segments for plumbing and foundations, the full impact of which were expected to register in Masco’s bottom line for fiscal 2013.

The article Resurgent Housing Sector Favors Masco originally appeared on Fool.com and is written by Rhodora Dagatan.

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