JP Morgan Gives Update On Masco Following Earnings Conference Call

Masco's MAS 2011 outlook for greater combined losses in Cabinets/Installation JP Morgan believes due in part to lower housing starts view as well as continued execution challenges, higher costs. On a macro level, Masco noted it now expects 2011 housing starts to grow 10%, vs. previously 15%. In addition, Masco noted that April sales appear to be down in the mid-single-digit range YOY, which JP Morgan notes is slightly worse that 1Q's -4%. Lastly, given that MAS largely operates on a 90-day lagged basis to new construction, JP Morgan does not believe the impact from a stronger 2H11 will be seen this year, which should result in a slight decline in total sales in 2011. While Masco noted that it continues to expect raw material inflation of $30-$40 million in 2011, it noted that it expects to offset the increase through productivity, working with suppliers and cost reductions, as well as price increases, which JP Morgan views as potentially difficult to implement given the current demand environment in which customers are shifting towards more price sensitive lower price-point products. JP Morgan has an Underweight rating and $12 PT Masco closed Tuesday at $13.01