Masco lifts 2026 earnings guidance as plumbing margins widen and free cash flow slips

Management now expects 2026 adjusted earnings per share of $4.65 to $4.75, up from the $4.40 to $4.60 range it gave in July, and GAAP earnings per share of $4.51 to $4.61, up from $4.21 to $4.41. The update came alongside a quarter that beat Wall Street’s estimates: adjusted earnings per share of $1.19 against an analysts’ average estimate of $1.03, a beat of 16.1%, Masco’s 4 consecutive quarterly beat. On a GAAP basis, diluted earnings per share were $1.17, down 26.9% from $1.60 in the second quarter but up 30.0% from $0.90 in the third quarter of 2025.

Revenue beats most of the past two years but slows from the second quarter

Revenue rose 2.6% year on year to $1,966 million, a pace beaten by only one of the previous eight quarters. That marks a turn from a three-year stretch in which revenue fell at a compound annual rate of 4.5% between 2022 and 2025; over five years it has grown at just 1.0% a year. The improvement did not carry through the quarter itself: revenue was 1.3% lower than the $1,992 million Masco reported in the second quarter. Operating income fell 28.1% quarter on quarter to $338 million from $470 million, though it was still up 11.6% from $303 million in the third quarter of 2025. Net income attributable to Masco was $230 million, down 27.7% from $318 million in the second quarter but up 21.7% from $189 million a year earlier. Gross margin reached 36.6%, up 2.4 percentage points from 34.2% a year earlier; operating margin rose to 17.2% from 15.8%, a gain of 1.4 points, close to its 17.3% average over the past twelve quarters; net margin rose to 11.7% from 9.9%, a gain of 1.8 points.

The margin gain is concentrated in Plumbing Products, helped by tax and a divestiture

By segment, Plumbing Products’ operating profit rose to $244 million from $196 million a year earlier, while Decorative Architectural Products’ profit slipped to $125 million from $127 million. This quarter’s margin gain sits almost entirely with plumbing.

Two items outside operating profit also helped net income. Masco’s effective tax rate fell to 25.5% from 27.5% in the quarter, adding directly to the bottom line without any change in operating performance. The company also completed the sale of its UK-based Bristan bathroom and kitchen fittings business during the quarter for £49 million ($65 million) net of cash, with up to £6 million ($8 million) more available if performance targets are met by the end of 2026; it booked a $13 million gain on the sale within “other, net.” Those two items help explain why net income attributable to Masco grew faster than operating profit did. Separately, the first nine months of 2026 included a net tariff benefit of about $90 million from refunded IEEPA duties, concentrated in Plumbing Products, after the US Supreme Court ruled those tariffs unlawful earlier in the year; the filing does not say how much of that fell in the third quarter specifically, so part of this quarter’s apparent margin strength may reflect a one-off refund rather than a structural pricing or cost gain.

Free cash flow falls as cash conversion weakens

Operating cash flow fell 18.6% year on year to $371.0 million, and free cash flow, operating cash flow less capital spending, fell to $332.0 million from $415.0 million. Both measures also declined sharply from the second quarter: operating cash flow dropped 25.2% quarter on quarter, in step with the quarterly fall in net income.

Buybacks keep shrinking the share count

Masco’s share count fell 5.2% over the trailing twelve months, as repurchases outpaced new share issuance. The company also lifted its quarterly dividend slightly, to $0.32 per share from $0.31 a year earlier, for $0.96 paid over the first nine months of 2026 against $0.93 in the same period of 2025.

Standing risks: tariffs, raw materials and a still-soft remodelling market

The tariff risk showed up directly in the numbers: the Supreme Court ruling that reversed the IEEPA tariffs turned a cost headwind the company had flagged a year earlier into a refund.

What the margin and cash-flow swings do to Masco’s model value

Our discounted cash flow model for Masco uses a base-case stage-one growth assumption of 2.0% and a discount rate calibrated to the company’s risk profile, built from trailing revenue and free cash flow margins. Within that model, a one-percentage-point lower free cash flow margin would reduce model value by −8.0%, while the FCF margin’s actual increase over the past year, if it persisted, would raise model value by 24.7%. Revenue growth carries a different weight: a five-point reduction in stage-one growth cuts model value by −29.8%, and a five-point increase raises it by 39.2%; a one-point rise in the discount rate lowers model value by −16.8%. This quarter’s margin expansion, rather than a change in revenue growth, is the input it moves most directly: Masco’s trailing twelve-month free cash flow margin reached 13.6%, near the top of its own history, while trailing revenue growth of 0.9% remains close to the model’s growth assumption. These are model values under stated assumptions, not a comparison with the share price.

The next checkpoints for guidance and cash flow

Investors will get the clearest read on whether this quarter’s margin gain holds when Masco reports fourth-quarter results.