UPDATE: Goldman Sachs Starts Masco (MAS) at Conviction Buy

(Updated - October 6, 2015 10:28 AM EDT)

Goldman Sachs initiated coverage on Masco (NYSE: MAS) with a Conviction Buy rating and a price target of $31. Analyst Samuel H. Eisner thinks the company is well positioned to benefit from an expected acceleration in RnR markets. He also said its Cabinets recovery is underappreciated.

"We initiate MAS at Buy, with a $31, 12-month price target, and add it to the Americas Conviction list as we believe exposure to an accelerating residential RnR market should benefit the company through its leading paints business (Behr™) and plumbing products (Delta™) segment," said Eisner. "We note that a recovery in Cabinets, which has struggled in the past few years, could allow returns to inflect higher than MAS’s already coverage-leading levels. Lastly, we believe MAS’s returns profile is likely to improve following the TopBuild spin (completed on June 30, 2015), leaving the company with three quality businesses."

The analyst added, "While we expect MAS will have slightly lower top-line growth vs. the rest of our building products coverage through 2017 (5.6% vs. 6.7%), we believe ROA and CROCI will inflect in 2015 (we expect roughly 700bps in CROCI expansion and 600bps in ROA expansion through 2017) as the TopBuild spin and the improving Cabinets segment drive an expansion in returns."

For an analyst ratings summary and ratings history on Masco click here. For more ratings news on Masco click here.

Shares of Masco closed at $26.46 yesterday.

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