MASCO CORP /DE/ (MAS)·Q4 2024 Earnings Summary

Executive Summary

• Q4 revenue declined 3% to $1.83B as Kichler divestiture and FX weighed; adjusted operating margin expanded 140 bps YoY to 15.9% and adjusted EPS rose 7% to $0.89, marking a seventh straight quarter of YoY margin expansion .
• Segment performance mixed: Plumbing sales -1% with adjusted margin +40 bps to 16.8%; Decorative Architectural sales -6% but adjusted margin +290 bps to 17.7%, aided by inventory timing and cost actions .
• 2025 outlook: sales down low-single digits (roughly flat to up LSD ex-divestiture and FX), Masco operating margin ~18%, Plumbing and Decorative margins 19.0–19.5%, and EPS $4.20–$4.45; guidance includes net impact of recently enacted China tariffs with mitigation plans under way .
• Capital returns and balance sheet: $268M of Q4 buybacks (3.3M shares), dividend raised 7% to $0.31/quarter, liquidity $1.63B; free cash flow “over $900M” in 2024 and gross debt/EBITDA 1.9x support continued buybacks/M&A (~$600M in 2025) .
• Potential stock catalysts: continued margin expansion despite flattish volumes, tariff mitigation progress, pro paint strength vs DIY softness, and reiterated 2026 margin targets (Plumbing 20%, Decorative 19–20%, Masco 18.5%) .

What Went Well and What Went Wrong

• What Went Well

  • Seventh consecutive quarter of YoY margin expansion; Q4 adjusted operating margin +140 bps YoY to 15.9% and adjusted EPS +7% to $0.89 (“strong operating results”) .
  • Decorative Architectural margin improved to 17.7% in Q4, helped by inventory timing and cost savings; pro paint up high-single digits in Q4 .
  • Strong cash generation and returns: free cash flow over $900M; liquidity $1.63B; Q4 buybacks $268M; 12th consecutive annual dividend increase (+7% to $0.31/qtr) .
  • Quote: “Our performance in the fourth quarter marked the seventh quarter in a row of year-over-year margin expansion.” — Keith Allman .

• What Went Wrong

  • Top line pressure: Q4 net sales -3% to $1.83B; North America down 4% in local currency; Decorative sales -6% (ex-divestiture and FX, Deco local currency +5%) .
  • Gross margin (adjusted) down 30 bps YoY to 34.8% in Q4; Decorative faced an unfavorable price-cost relationship in Q4 .
  • Macro/tariffs headwinds: 2025 market view flat to down LSD; newly imposed 10% China tariffs represent ~$45M annualized gross headwind before mitigation on ~$450M China imports (80% Plumbing/20% Decorative) .

Financial Results

Consolidated – headline metrics

• YoY (Q4): Revenue -3% (1.828B vs 1.882B), adjusted EPS +7% ($0.89 vs $0.83), adjusted op margin +140 bps (15.9% vs 14.5%) .
• QoQ (Q4 vs Q3): Revenue seasonally lower; margins and EPS lower sequentially vs Q3 peak; management highlighted inventory timing in paint and normal cadence .

Segment breakdown (Q4 2024 vs Q4 2023)

KPIs and cash/returns

Notes: Decorative Architectural Q4 had a mid-single-digit inventory timing benefit to sales; all else equal this is a headwind to early 2025 comps .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• Strategic and execution tone: “We wrapped up 2024 with another quarter of solid operating results… the seventh quarter in a row of year-over-year margin expansion… adjusted EPS grew 7% to $0.89” — Keith Allman .
• Market and 2025 setup: “We expect our sales to be approximately flat to up low-single digits when adjusted for divestitures and currency… anticipate full year adjusted EPS to be in the range of $4.20 to $4.45” .
• Segment outlook: “We expect Plumbing margins in the range of 19% to 19.5% and Decorative margins also in the range of 19% to 19.5%, resulting in a Masco operating margin of approximately 18%” .
• Capital allocation: “Our Board approved a 7% increase in our dividend for 2025… and we expect to deploy approximately $600 million to share repurchases or acquisitions in 2025” .
• Tariffs: “In 2025, we expect to import approximately $450 million from China… a 10% tariff… would have an annualized impact of approximately $45 million before mitigating actions… confident we will be able to mitigate” — Rick Westenberg .
• Innovation: “FreshWater IQ… a smart monitoring system… Delta… introduced water filtration products… Behr rated #1 in interior paint, #1 in exterior paint, and #1 in exterior stain” — Keith Allman .

Q&A Highlights

• Inventory timing in paint: Q4 Decorative saw a mid-single-digit sales benefit from timing; expected to be a headwind in early 2025; profit impact proportional to segment profitability .
• M&A priorities: Focus on bolt-on acquisitions in paint and plumbing; technology can be a driver where “buy vs build” makes sense; remain patient and return-focused .
• Tariff mitigation and cadence: Combination of pricing, supplier negotiations, sourcing shifts; tariffs effective Feb 4 create timing lag through inventory; expect margins roughly flat in H1 and to expand in H2 .
• Pro vs DIY dynamic: Expect 2025 pro paint up mid-single digits and DIY down low single digits; structural shift toward “do-it-for-me” among older cohorts offset by millennial DIY activity .
• Working capital: WC improved to 15.1% of sales in 2024 (benefit from Kichler divestiture); expected to normalize ~16% of sales in 2025 .
• Channel inventories: No material distributor/retailer inventory build in Plumbing ahead of tariffs in Q4 .

Estimates Context

• S&P Global (Capital IQ) consensus estimates for Q4 2024 could not be retrieved at request time due to provider rate limits; therefore, we cannot quantify beats/misses versus Street for revenue or EPS. We anchored comparisons to company-reported actuals and management guidance [Values from S&P Global were unavailable at request time].

Where estimate revisions may adjust:

• 2025 EPS guided to $4.20–$4.45 with Masco OP margin ~18% and segment margins 19.0–19.5%, despite sales down LSD on a reported basis; if consensus assumed higher top-line, models may shift mix toward margin/price-cost execution and lower volume, with H2-weighted profitability due to tariff mitigation timing .

Key Takeaways for Investors

• Margin resilience continues: Q4 adjusted OP margin expanded 140 bps YoY to 15.9% and adjusted EPS rose 7% despite -3% sales; management again executed cost savings and pricing to offset volume/FX/divestiture headwinds .
• Decorative recovery in profitability: Q4 Decorative adjusted margin rose to 17.7% aided by inventory timing and efficiencies; expect timing to reverse near-term, but 2025 margin guided to ~19–19.5% .
• 2025 algorithm: flattish ex-divestiture/FX sales, Masco OP margin ~18%, EPS $4.20–$4.45 with H2-weighted expansion as tariff mitigation layers in; near-term cadence matters for trading set-ups .
• Tariff risk manageable: ~$45M annualized gross headwind before mitigation; diversified sourcing, pricing, and supplier offsets in place; monitoring policy uncertainty remains critical .
• Pro over DIY continues: Pro paint strength (HSD in Q4) offsets DIY softness; portfolio skew and Home Depot partnership underpin share gains .
• Cash returns intact: 12th dividend raise (+7% to $0.31/qtr) and ~$600M 2025 deployment capacity (buybacks/M&A) supported by >$900M 2024 FCF and 1.9x gross debt/EBITDA .
• 2026 margin targets reiterated: Plumbing 20%, Decorative 19–20%, Masco ~18.5% — credibility reinforced by multi-quarter margin expansion through a flat market .

Appendix: Additional Data Points

• Q4 consolidated income statement, segment detail, balance sheet, cash flow and reconciliations provided in the 8‑K exhibit .
• Q3 2024 summary: revenue $1.983B; adjusted OP margin 18.2%; adjusted EPS $1.08; FY24 adj EPS guidance $4.05–$4.15 .
• Q2 2024 summary: revenue $2.091B; adjusted OP margin 19.1%; adjusted EPS $1.20; FY24 adj EPS guidance $4.05–$4.20 .

Sources: Q4 2024 8-K and press release, Q4 2024 earnings call transcript; prior-quarter 8-Ks for Q2 and Q3 2024 .