Masco Q2 Earnings Call Highlights

Key Points

• Masco raised its full-year adjusted EPS outlook to $4.40–$4.60 from $4.10–$4.30, helped by an estimated $85 million net benefit from tariff refunds, while maintaining its low-single-digit sales growth forecast.
• Second-quarter sales fell 3%, but operating profit rose 17% to $482 million and adjusted EPS increased 26% to $1.64. Results benefited from pricing, cost savings and tariff refunds, partly offset by strategic investments and higher costs.
• Business trends diverged by market: pro paint sales grew mid-single digits, while DIY paint declined high single digits and North American plumbing sales fell 6% due partly to strategic investments. Masco plans to deploy approximately $1 billion on share repurchases or acquisitions in 2026.

Masco NYSE: MAS reported second-quarter results that included lower sales but higher operating profit and earnings per share, aided by tariff refunds, pricing actions and cost savings initiatives. The company raised its full-year earnings outlook while maintaining its sales forecast amid continued uncertainty in housing-related markets, commodity costs and trade policy.

Second-quarter net sales declined 3% from a year earlier, though President and CEO Jon Nudi said sales would have been roughly flat excluding the effect of targeted strategic investments recognized during the period. Operating profit increased 17% to $482 million, while operating margin expanded to 24.2%. Adjusted earnings per share rose 26% to $1.64.

Masco recorded an approximately $95 million net benefit from refunds of tariffs imposed under the International Emergency Economic Powers Act, or IEEPA. Nudi said the benefit was partly offset by strategic investments intended to support growth and employee-related incentive compensation costs.

Plumbing Results Reflect Investment Impact

Sales in Masco’s Plumbing Products segment declined 3% in local currency during the quarter. North American plumbing sales fell 6% in local currency, reflecting a difficult comparison with the prior-year quarter and the company’s strategic investments. Nudi said those investments accounted for more than half of the year-over-year impact on North American sales.

Masco did not detail the investments for competitive reasons, but Nudi said they were broad-based rather than directed toward one customer or channel. He said the company viewed them as a “down payment” on its strategy to accelerate growth through stronger brands, expanded commercial capabilities and operational improvements. The investments were not primarily promotional in nature, according to Nudi, and were concentrated in the second quarter.

Excluding the investments, North American plumbing sales increased low single digits in the first half. CFO Richard Westenberg said growth at Delta Faucet and Watkins Wellness supported the performance. The company continues to expect full-year Plumbing segment sales to rise low single digits.

International plumbing sales rose 4% in local currency, driven by growth across several European markets, including Germany, partially offset by continued weakness in China. Nudi said Masco remains focused internationally on its Hansgrohe and Axor brands after divesting its U.K.-based Bristan Group business to FM Mattsson Group.

Plumbing operating profit rose 26% to $361 million, and segment operating margin expanded to 27%. The improvement reflected the net tariff refund benefit, pricing actions and cost savings, partially offset by lower volume and higher commodity, tariff and employee-related costs.

Paint Segment Shows Diverging Demand Trends

Sales in Masco’s Decorative Architectural segment declined 4%. Pro paint sales increased mid-single digits, while DIY paint sales declined high single digits amid continued weakness in the DIY paint market. The segment also faced an unfavorable comparison related to a customer transition in its primer and applicator business.

Masco said it does not expect the primer and applicator transition to have a meaningful impact in the second half. It maintained its expectation for full-year pro paint sales to increase mid-single digits and DIY paint sales to decrease mid-single digits.

Decorative Architectural operating profit was unchanged from the prior year at $148 million, with operating margin at 22.6%. Cost savings and price increases offset lower volume and higher commodity costs.

During the question-and-answer session, Westenberg said second-half Decorative Architectural margins will also reflect employee-related incentive compensation costs, the timing of growth investments and commodity inflation. Masco expects to remain price-cost neutral in the segment for the full year, while it expects Plumbing price-cost to be positive.

Tariffs, Commodities and Full-Year Outlook

Masco said its full-year guidance includes tariffs currently in effect, including Section 232 tariffs on copper, steel and aluminum, as well as recently implemented Section 301 tariffs. Westenberg said the company generally sees about a one-quarter lag between tariff implementation and the impact on its profit and loss statement.

The company expects mid-single-digit commodity inflation in both the Plumbing and Decorative Architectural segments during the second half of 2026. Westenberg cited upward pressure in metals, including copper, as well as oil-related inputs.

With the estimated $85 million full-year net benefit from IEEPA tariff refunds, Masco raised its adjusted 2026 earnings outlook to $4.40 to $4.60 per share from its prior range of $4.10 to $4.30. It maintained its expectation for companywide sales to rise low single digits.

• Masco now expects companywide operating margin of about 18%, compared with prior guidance of about 17%.
• Plumbing operating margin is expected to reach about 20%, up from prior guidance of 18%.
• Decorative Architectural sales are expected to be roughly flat for the year, with operating margin of about 19%.

Capital Allocation and Cash Flow

Masco ended the quarter with $1.5 billion of liquidity and gross debt to EBITDA of 2.1 times. Working capital was 19.8% of sales at quarter-end, elevated by tariffs and higher input costs. The company still expects working capital to finish the year at approximately 16.5% of sales.

The company returned $454 million to shareholders in the quarter through dividends and share repurchases, including $390 million of stock repurchases. Masco now expects to deploy approximately $1 billion toward share repurchases or acquisitions in 2026, compared with its prior expectation of at least $800 million.

Nudi said the company continues to see long-term support for repair and remodeling activity from home equity levels, an aging housing stock and pent-up demand for improvement projects. He said Masco is investing in its brands and operational performance to position the business for growth as market conditions improve.

About Masco (NYSE:MAS)

Masco Corporation is a global leader in the design, manufacture and distribution of branded home improvement and building products. Founded in 1929 and headquartered in Livonia, Michigan, the company has evolved from a small door‐bell manufacturer into a diversified enterprise serving both residential and commercial markets. Over its history, Masco has grown through a combination of organic innovation and strategic acquisitions, building a portfolio of well-recognized brands.

The company's product offerings are organized into two primary segments.

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