Masco Corporation Q1 FY2026 earnings call

• Evolution of Masco Executive Committee: Jay Shah and Rick Marshall to retire. Leaders of four largest businesses now report directly to CEO. Adding two new leaders to executive committee. • Restructuring actions: Incurred ~$8 million in first quarter, expect ~$50 million total in 2026. Savings fund growth initiatives and margin expansion. • First quarter results: Net sales increased 6% or 4% local currency. Operating profit $324 million, increase of 13%. EPS grew 20% to $1.04 per share. • Capital allocation: Returned $267 million to shareholders through dividends and share repurchases. Entered two-year delay draw term loan of up to $500 million to repurchase shares. • Investor Day: Upcoming on May 13th in New York City to share strategy and long-term goals.

Plumbing product sales increased 7% in local currency. North American sales increased 9% in local currency, driven by favorable pricing and slightly higher volumes. Delta Faucet had strong sales growth across all channels. International plumbing sales increased 1% in local currency, driven by growth in many European markets. Operating profit for plumbing product segment grew 10% to $250 million with operating margin expanding 10 basis points to 18.3%. Decorative architectural sales were in line with prior year. DIY paint sales decreased low single digits, while pro paint sales grew mid-single digits. Operating profit for the segment increased 19% to $105 million with operating margin 19%.

• Maintain 2026 earnings per share guidance in range of $4.10 to $4.30 per share. • Sales expected to be up low single digits for 2026 but will incur higher than previously anticipated commodity costs. • MASCO margin to be relatively flat in first half of year versus previous guide of margin contraction and to expand in second half as tariff impact laps and mitigation actions take hold. • Plumbing segment expects 2026 full-year sales up low single digits and operating margin expand to approximately 18%. • Decorative architectural segment expects 2026 sales roughly flat with prior year and operating margin approximately 19%.

• Macroeconomic and geopolitical uncertainty could cause actual results to differ from forward-looking statements. • Tariff changes uncertainty, though anticipate favorable impact before mitigation but hard to quantify and any tailwind likely offset by commodity and related input costs. • Elevated and volatile copper prices, oil prices impacting material and logistics costs. • Uncertainty in consumer sentiment, existing home turnover, and impact of oil shock on economy.

Q: On Section 232s, how is the potential favorability driven and can it be quantified?

A: It's a composite impact including multiple tariff rulings. On composite expect favorable impact but difficult to quantify due to moving parts.

Q: Regarding pricing expectations, how is it for plumbing and decorative architectural?

A: Plumbing expectation mid-single-digit, decorative architectural dependent on commodity perspective with upward pressure in mid to high single digits.

Q: On DECARC segment margins, relative importance of cost savings vs pricing and quarterly cadence?

A: Margins were up significantly, Q1 performance driven by cost reduction actions including restructuring. Quarterly cadence, Q1 was normalized with easy comp, and will continue to manage margins.

Q: On plumbing volumes in first quarter, attribution to consumer resilience and market share?

A: A bit of both, but market share gains likely a driver as team firing on all cylinders with strong plans across channels.

Q: On growth guidance in plumbing, deceleration expectations?

A: Uncertainty in macro and geopolitical environment causes guidance to be maintained, watching demand environment closely.

Q: On Hansgrohe business in Europe, impact of conflict?

A: No dramatic change seen yet, watching closely, Europe holding up, China remains challenging.

Q: On full year guidance base case, how to think about it?

A: Informed by current market info, uncertainty, and expect to land in mid part of range.

Q: On capital allocation target increase to $800 million, focus on share repurchase or M&A?

A: Opportunistic, focus on share repurchases for now, M&A as bolt-on if right deal found.

Q: On cost and margin dynamics, levers to offset?

A: Footprint, cost reductions, restructuring, and pricing levers to be pulled.

Q: On seeking refunds from previously paid tariffs?

A: Refund process uncertain, not banking on refunds, decision to take on debt not based on refunds.

Q: On restructuring actions benefit in 2026 and beyond?

A: Incurred $8 million in Q1, expect $50 million total in 2026, savings redeployed for growth and margin expansion, more benefit in 2027 and 2028.

Q: On incentive comp structure change?

A: Changed to balance focus on top line and bottom line, profit still largest percentage but balanced for top line focus.

Q: On margin pressure in 2Q, expectation?

A: Expect margin contraction in 2Q as lapping tariff impact from last year, but expect strong quarter.

Q: On incremental price actions in segments?

A: Pricing is last resort, start with negotiating suppliers, changing footprint, taking costs out, will monitor and act if needed.

Q: On Watkins business growth and TAM?

A: Watkins grew in Q1, more details on investor day, Sana with low household penetration driving growth.

Q: On sensitivity of DIY paint to gasoline prices?

A: Tough to single out, monitor consumer sentiment and economy, lower ticket items tend to be more resilient but not immune.

Q: On longer-term growth with leadership changes?

A: New organization to increase speed and agility, meet weekly, focus on centers of excellence and deep functional knowledge.

Q: On working capital target of 16.5% of sales, how to achieve?

A: Higher working capital due to tariff implications, will normalize in second half, team focused on managing cost and working capital.

Q: On plumbing volume outperformance in first quarter, attribution to consumer resilience and market share?

A: Bit of both, confident in market share gains with strong plans across channels.