Masco agrees to sell Kichler Lighting for $125 million

LIVONIA, Mich. - Masco Corporation (NYSE: NYSE:MAS), a global leader in home improvement and building products, has reached an agreement to sell its Kichler Lighting business to a Kingswood Capital Management affiliate. The transaction, valued at approximately $125 million subject to adjustments, is anticipated to close by the end of the year, pending regulatory approvals and customary closing conditions.

Kichler Lighting, based in Solon, Ohio, is known for its decorative residential and light commercial lighting, ceiling fans, and LED systems, serving both consumer and professional markets. Kingswood Capital Management, a private equity firm located in Los Angeles, California, also owns Progress Lighting, which operates in a similar market segment.

Masco's President and CEO, Keith Allman, expressed confidence that the sale would benefit both Kichler Lighting and Kingswood, suggesting that Kichler will thrive under an organization with a dedicated focus on lighting. He also noted that the transaction is expected to deliver value to Masco's shareholders.

Masco Corporation, headquartered in Livonia, Michigan, boasts a portfolio of leading brands such as Behr® paint, Delta® and Hansgrohe® faucets, Liberty® hardware, and HotSpring® spas. The company prides itself on leveraging these brands to serve customers and enhance shareholder value.

This strategic divestiture marks a shift for Masco, as it moves to streamline its operations and focus on its core businesses. The deal is based on a press release statement and further details will be disclosed upon the completion of the sale.

In other recent news, Masco Corporation reported mixed Q2 results, with a slight decline in net sales by 2%, yet an increase in gross profit by $16 million. The company's Plumbing segment reported a 2% increase in sales, while the Decorative Architectural segment experienced a 7% drop. Despite these mixed results, Masco maintains a stable outlook, expecting full-year sales to remain steady with projected operating margins between 17% to 17.5%.

Oppenheimer reaffirmed its Perform rating on Masco, citing potential stabilization in the company's plumbing business, prospects for the DIY paint segment, and the possibility of margin improvements in the second half of 2024. BMO Capital Markets adjusted its outlook on Masco, raising its price target to $78.00 and maintaining a Market Perform rating, citing the company's consistent earnings per share (EPS) guidance. Similarly, analyst Timothy Wojs at Baird revised the price target for Masco's shares to $88.00, maintaining an Outperform rating, and expressing confidence in Masco's continued resilience in a challenging macroeconomic environment.

These recent developments highlight Masco Corporation's resilience amid market volatility and its potential for a strong total return profile. However, the realization of this potential is contingent on whether the macroeconomic environment will be favorable for such a scenario.

InvestingPro Insights

As Masco Corporation (NYSE: MAS) navigates the divestiture of its Kichler Lighting business, investors and stakeholders are keenly observing the company's financial health and market position. With an adjusted market capitalization of $17.36 billion, Masco continues to be a significant player in the home improvement and building products industry. Investors may find encouragement in the fact that Masco has a history of rewarding shareholders, having raised its dividend for 10 consecutive years, a testament to its financial stability and commitment to returning value.

On the performance front, Masco's stock has been trading near its 52-week high, with a price percentage of 97.13% of that peak, indicating a strong market sentiment. This is supported by a robust three-month price total return of 16.25%, showcasing the company's recent positive momentum. Additionally, Masco has maintained a solid dividend yield of 1.46%, with a modest growth in dividends over the last twelve months of 1.75%, which may appeal to income-focused investors.

However, it's important to note that 18 analysts have revised their earnings expectations downwards for the upcoming period. This, coupled with a high P/E ratio of 19.28 relative to near-term earnings growth, suggests that investors should keep an eye on future earnings reports and market trends for a comprehensive understanding of the company's valuation.

For those interested in deeper analysis and more InvestingPro Tips, Masco Corporation has an additional 11 tips available, providing a more nuanced view of the company's financial health and market prospects. Visit InvestingPro for further insights: https://www.investing.com/pro/MAS

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