Masco (MAS)

Home-building design and manufacturing company Masco Corporation (NYSE:MAS) missed Wall Street’s revenue expectations in Q3 CY2025, with sales falling 3.3% year on year to $1.92 billion. Its non-GAAP profit of $0.97 per share was 5.7% below analysts’ consensus estimates.

Company Overview

Headquartered just outside of Detroit, MI, Masco (NYSE:MAS) designs and manufactures home-building products such as glass shower doors, decorative lighting, bathtubs, and faucets.

Traditionally, home construction materials companies have built economic moats with expertise in specialized areas, brand recognition, and strong relationships with contractors. More recently, advances to address labor availability and job site productivity have spurred innovation that is driving incremental demand. However, these companies are at the whim of residential construction volumes, which tend to be cyclical and can be impacted heavily by economic factors such as interest rates. Additionally, the costs of raw materials can be driven by a myriad of worldwide factors and greatly influence the profitability of home construction materials companies.

Other companies that compete in Masco’s markets include The Home Depot (NYSE:HD), Lowe’s (NYSE:LOW), and private company American Standard Brands.

A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, Masco’s sales grew at a sluggish 1.7% compounded annual growth rate over the last five years. This was below our standards and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Masco’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 2.6% annually.

We can better understand the company’s sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Masco’s organic revenue averaged 1% year-on-year declines. Because this number is better than its two-year revenue growth, we can see that some mixture of divestitures and foreign exchange rates dampened its headline results.

This quarter, Masco missed Wall Street’s estimates and reported a rather uninspiring 3.3% year-on-year revenue decline, generating $1.92 billion of revenue.

Looking ahead, sell-side analysts expect revenue to grow 3% over the next 12 months. Although this projection suggests its newer products and services will fuel better top-line performance, it is still below the sector average.

Masco’s gross margin is good compared to other industrials businesses and signals it sells differentiated products, not commodities. As you can see below, it averaged an impressive 34.7% gross margin over the last five years. Said differently, Masco paid its suppliers $65.33 for every $100 in revenue.

Masco produced a 34.2% gross profit margin in Q3, down 2.3 percentage points year on year. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Masco has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 16.6%. This result isn’t too surprising as its gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, Masco’s operating margin decreased by 1.2 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, Masco generated an operating margin profit margin of 15.8%, down 2.2 percentage points year on year. Since Masco’s gross margin decreased more than its operating margin, we can assume its recent inefficiencies were driven more by weaker leverage on its cost of sales rather than increased marketing, R&D, and administrative overhead expenses.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Masco’s EPS grew at an unimpressive 7% compounded annual growth rate over the last five years. This performance was better than its flat revenue but doesn’t tell us much about its business quality because its operating margin didn’t improve.

Diving into the nuances of Masco’s earnings can give us a better understanding of its performance. A five-year view shows that Masco has repurchased its stock, shrinking its share count by 19.9%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Masco, its two-year annual EPS growth of 4.2% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q3, Masco reported adjusted EPS of $0.97, down from $1.08 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects Masco’s full-year EPS of $4.03 to grow 5.4%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Masco has shown robust cash profitability, enabling it to comfortably ride out cyclical downturns while investing in plenty of new offerings and returning capital to investors. The company’s free cash flow margin averaged 10.7% over the last five years, quite impressive for an industrials business.

Masco’s free cash flow clocked in at $415 million in Q3, equivalent to a 21.6% margin. This result was good as its margin was 2.6 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, leading to temporary swings. Long-term trends carry greater meaning.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although Masco hasn’t been the highest-quality company lately because of its poor top-line performance, it found a few growth initiatives in the past that worked out wonderfully. Its five-year average ROIC was 46.5%, splendid for an industrials business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Masco’s ROIC has unfortunately decreased significantly. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Masco reported $559 million of cash and $3.17 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $1.45 billion of EBITDA over the last 12 months, we view Masco’s 1.8× net-debt-to-EBITDA ratio as safe. We also see its $51 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly Masco blew past analysts’ organic revenue expectations this quarter. On the other hand, its EBITDA missed and its EPS fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 2.5% to $66.69 immediately after reporting.

Updated: December 4, 2025 at 10:34 PM EST

Before deciding whether to buy Masco or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

We cheer for all companies making their customers lives easier, but in the case of Masco, we’ll be cheering from the sidelines. To begin with, its revenue growth was weak over the last five years, and analysts don’t see anything changing over the next 12 months. And while its stellar ROIC suggests it has been a well-run company historically, the downside is its diminishing returns show management's prior bets haven't worked out. On top of that, its organic revenue declined.

Masco’s P/E ratio based on the next 12 months is 15.7x. This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $73.67 on the company (compared to the current share price of $64.41).