Masco Q3 2026: prices lift operating profit 12%, buybacks push EPS up 30% to $1.17

Masco makes Delta and hansgrohe faucets, Behr paint, Liberty hardware and HotSpring spas. In the third quarter of 2026 (July–September) its net sales rose 3% to $1,966 million, operating profit rose 12% to $338 million and diluted EPS rose 30% to $1.17. Unlike the second quarter, this quarter's profit growth did not come from a tariff refund: higher selling prices and cheaper input sourcing widened margins. The jump in EPS, though, is about twice the growth in operating profit, because Masco has bought back about 6% of its shares in a year, its tax rate fell and it booked a $13 million gain on selling its UK Bristan business.

Key figures

bps = basis points; 100 bps = 1 percentage point. "Adjusted" figures are Masco's own non-GAAP numbers. They leave out restructuring ("rationalization") charges ($13M this quarter, $8M a year ago) and the $13M Bristan gain, and they apply a fixed 24.5% tax rate in both years. Segment figures include Liberty Hardware in Plumbing for both years, after this year's reorganization.

For the first nine months, sales rose 2% to $5,875M, operating profit rose 12% to $1,125M (this includes about $90M of net IEEPA tariff refund benefit) and diluted EPS rose 25% to $3.81.

Takeaway: Masco's third quarter is the first real evidence of improvement this year: operating profit grew 12% with no tariff refund behind it. Most of that came from price, not volume, and buybacks roughly doubled the growth at the per-share level. The 30% EPS headline overstates how fast the business itself is growing.

Sales: price did the work

Excluding the Bristan sale (which took $14M out of the year-ago comparison) and currency, sales grew 4%. According to the 10-Q, higher net selling prices "across the entire company" added five percentage points and higher North American plumbing volume added two. Lower volume in paint and in International plumbing took away two points, and a less favorable mix (more of the cheaper products) took away one.

That is a clear change from Q2, when North American volume fell 5% and price added only 1%. In local currency, North American sales rose 5% this quarter. International sales fell 5%, or 1% excluding Bristan.

Plumbing Products (faucets, showers, bath fittings, hardware, spas): sales rose 4% to $1,338M, or 5% in local currency and excluding the divestiture. Operating profit rose 24% to $244M and margin widened from 15.2% to 18.2%. The 10-Q credits "higher net selling prices, cost savings initiatives, and lower tariff costs," partly offset by higher commodity costs, worse mix and employee costs. Lower tariff costs here mean the ongoing saving from no longer paying the IEEPA tariffs the Supreme Court struck down, not a refund of past payments.

Decorative Architectural Products (mainly Behr paint and painting accessories): sales were flat at $628M as higher prices offset lower volume. Operating profit slipped 2% to $125M, hurt by "higher commodity costs, lower sales volume, and increased employee-related costs." Paint is the part of Masco that is not growing.

Margins and costs

Gross margin (sales minus the direct cost of making the goods, as a share of sales) rose 240 bps to 36.6%. The 10-Q says higher net selling prices alone lifted gross profit by 14%, with cost savings and lower tariff costs adding more, before higher commodity costs, worse mix and employee costs took some back. SG&A (selling, general and administrative costs) grew faster than sales, up 8% to $381M, or 19.4% of sales compared with 18.4% a year ago. Masco attributes five points of that growth to employee-related costs. Unallocated corporate expense rose to $31M from $20M.

What the headline numbers hide

• EPS grew more than twice as fast as operating profit. Operating profit rose 11.6% (12.5% adjusted). Pretax income rose 16.7%, helped by the $13M Bristan gain in "other, net". The tax rate fell to 25.5% from 27.5%. Diluted shares fell 6.2% to 196M. Using Masco's own adjusted figures, which strip out the gain and hold the tax rate at 24.5%, pretax income rose 13.7% and EPS rose 23%. About 6–7 of those 23 points come from the smaller share count rather than from the business.
• The buyback is partly paid for with debt. In the first nine months Masco spent $852M on its own shares, against $788M of operating cash flow and $191M of dividends. It borrowed $300M on a new term loan (4.5% interest), and the 10-Q says those funds were "utilized to repurchase shares." Long-term debt is $3,245M, up from $2,945M at the end of 2025. Interest expense rose 16% to $29M. Shareholders' equity is now negative ($-193M), meaning total liabilities ($5,531M) now exceed total assets ($5,338M) on the balance sheet, largely because years of buybacks have been charged against equity. That is not unusual for a heavy buyback company, but it leaves less room if earnings fall.
• No refund this quarter. In Q2, Masco booked a net IEEPA tariff refund benefit of about $95M. The nine-month total is about $90M, so Q3 carried no net refund benefit (if anything, a small cost). The margin gain this quarter is operational.
• Cash conversion is fine. Third-quarter operating cash flow (nine-month minus first-half) was $371M, against net income of $240M. It was $456M a year ago, when working capital released more cash. Year to date, operating cash flow of $788M roughly matches net income of $801M. Receivables ($1,254M) fell from $1,342M at the end of June and receivable days are 54, against 53 a year ago. Nothing points to sales being pulled forward.
• Restructuring continues. Charges were $13M in the quarter and $33M year to date, and Masco expects about $50M for 2026. The adjusted figures exclude them, which is why adjusted EPS ($1.19) sits above GAAP ($1.17) even after the Bristan gain is removed.

On balance the quarter is flattered: the business genuinely improved, with adjusted operating profit up 12.5%, but GAAP EPS growth of 30% also includes a one-off sale gain, a lower tax rate and 6% fewer shares.

Capital returned

In Q3, Masco paid $260M for share repurchases (cash flow statement, nine months minus first half). That included the final 0.8M-share delivery from its $300M accelerated buyback, in which a bank hands over the shares up front and the final count is settled later. It also paid $62M in dividends, $322M in total. The quarterly dividend rose to $0.32 from $0.31. $1.2B remains under the $2.0B authorization. Masco still expects to spend about $1.0B on buybacks in 2026, which implies roughly $150M in Q4.

Did last time's read hold up?

Our Q2 report said the guidance raise then rested on the tariff refund rather than better demand. It named three things to watch: North American volume, whether SG&A spending would turn into growth while pricing added only ~1%, and how far the debt-funded buyback would keep lifting per-share results. On the first two, Q3 came in better than that read implied: North American plumbing volume grew 2% and price added 5%, not 1%. Paint volume is still falling, though. On the third, the buyback did exactly what we expected: it accounts for about a quarter of adjusted EPS growth.

Outlook

Masco now expects 2026 adjusted EPS of $4.65–$4.75 (previously $4.40–$4.60) and GAAP EPS of $4.51–$4.61. The difference is $0.19 of restructuring charges, less $0.05 for the Bristan gain. CEO Jon Nudi credited "the strength of our operational performance year-to-date" and added that "we expect the demand environment to remain challenged in the near term."

Nine-month adjusted EPS was $3.86, so the guidance implies $0.79–$0.89 in Q4. Q4 will have no refund to lean on.

Our read: pricing carried this quarter, and the boost from a price increase shrinks once the year-ago comparison already includes it. The questions for Q4 and 2027 are:

1. Whether North American plumbing volume keeps growing once the price increases lap, and whether paint volume stops falling.
2. Whether gross margin holds near 36–37% as commodity costs rise. The 10-Q names commodities as a headwind in both segments.
3. How much per-share growth is left from buybacks once the ~$1.0B 2026 program is done, with debt already $300M higher than in January.