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Owens Corning (OC - Free Report) reported fourth-quarter 2020 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. While earnings beat the consensus estimate for the seventh straight quarter, revenues outpaced the same for the third consecutive quarter. Moreover, both the metrics improved year over year for the fourth quarter.
The company’s results benefited from improving customer demand in most of the end markets served. Its residential market, primarily in the United States, was driven by strong demand for new single-family housing, and a rise in repair and remodeling investments. Moreover, market-leading businesses, innovative product and process technologies, as well as capabilities also contributed to the results. Its commercial and industrial markets are also registering improvements. Notably, all three of its businesses delivered double-digit EBIT margins for the second consecutive quarter.
Inside the Headlines
The company reported adjusted earnings of $1.90 per share, surpassing the Zacks Consensus Estimate of $1.13 by 36.7%. Moreover, the bottom line improved 68.1% year over year.
Net sales of $1.93 billion outpaced the consensus mark of $1.81 billion by 6.6% and increased 14% year over year. The upside was driven by robust revenue growth in Roofing and Composites businesses, partially overshadowed by soft sales growth in the Insulation business.
Owens Corning Inc Price, Consensus and EPS Surprise
Net sales in the Composites segment gained 14% year over year to $547 million. The company’s focus on higher-value downstream businesses and key geographies wherein it has a strong market position, as well as increasing manufacturing productivity continues to drive growth. However, earnings before interest and taxes (EBIT) margin of 11% contracted 100 basis points (bps) from the year-ago quarter’s 12%.
Insulation segment’s net sales were $728 million, up 1% year over year. Sales were impacted by slightly lower volumes owing to supply constraints and limited inventories, offset by higher U.S. residential new construction demand and increase in price realization. In technical and other insulation businesses, volumes improved on a sequential and year-over-year basis (marginally), driven primarily by strong performance in U.S. FOAMULAR and global mineral wool businesses. EBIT margin expanded 300 bps points year over year to 15% for the quarter. Positive manufacturing performance and higher selling prices in North American residential benefited the margin.
The Roofing segment’s net sales increased 33% year over year to $702 million driven by 36% volume growth, which was offset by lower third-party asphalt sales. Pricing in the quarter was flat. For the quarter under review, the company registered growth in the asphalt shingle market in the United States. EBIT margin expanded 1,000 bps year over year to 26% due to higher sales volumes in both shingles and roofing components, along with persistent deflationary impact of asphalt.
Operating Highlights
Adjusted EBIT for the quarter totaled $306 million, reflecting growth of 50% on a year-over-year.
2020 Highlights
Earnings came in at $5.21 per share for the year, up 14.8% from 2019. Net sales were $7.1 billion, down 1% from 2019. Adjusted EBIT was 878 million, marking a 6% improvement from 2019. Higher demand for products, combined with strong manufacturing performance and improved operating efficiencies, resulted in earnings growth for 2020 despite lower revenues.
Balance Sheet
As of Dec 31, 2020, the company had cash and cash equivalents of $717 million compared with $172 million at 2019-end. Long-term debt — net of current portion — totaled $3.13 billion, up from $2.99 billion at 2019-end.
Owens Corning had $1.8 billion of available liquidity at 2020-end. During 2020, it repaid the $200 million remaining on its term loan and contributed $122 million to global pension plans.
In the fourth quarter of 2020, net cash provided in operating activities was $418 million, down from $441 million a year ago. In 2020, the metric was $1.14 billion, up from $1.04 billion in 2019.
Free cash flow came in at $314 million for the quarter, up from $308 million a year ago. For the full year, the metric was $828 million, up from $590 million in 2019.
Through 2020, the company returned $396 million to shareholders in the form of share repurchases and dividends. At Dec 31, 2020, 9.5 million shares were available under the current authorization. On Dec 3, 2020, Owens Corning’s board of directors approved a share repurchase authorization for up to 10 million shares of the company’s common stock.
2021 Outlook
Owens Corning’s businesses are dependent on residential repair and remodeling activity, U.S. housing starts, global commercial construction activity, as well as global industrial production. Although the company expects the COVID-19 pandemic to continue to create market uncertainty, it anticipates persistent strength in the U.S. residential housing market, and recovery of commercial and industrial markets at a slower pace.
General corporate expenses are expected between $135 million and $145 million. Capital additions will be approximately $460 million, below depreciation and amortization of $480 million. Interest expense is estimated between $120 million and $130 million. The company estimates an effective tax rate of 26-28% and a cash tax rate of 18-20%, both on adjusted pre-tax earnings.
Zacks Rank
Owens Corning — which shares space with Armstrong World Industries, Inc. (AWI - Free Report) , Gibraltar Industries, Inc. (ROCK - Free Report) and Installed Building Products, Inc. (IBP - Free Report) in the same industry — currently carries a Zacks Rank #3 (Hold).
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You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.
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Owens Corning (OC) Q4 Earnings & Revenues Beat Estimates
Owens Corning (OC - Free Report) reported fourth-quarter 2020 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. While earnings beat the consensus estimate for the seventh straight quarter, revenues outpaced the same for the third consecutive quarter. Moreover, both the metrics improved year over year for the fourth quarter.
The company’s results benefited from improving customer demand in most of the end markets served. Its residential market, primarily in the United States, was driven by strong demand for new single-family housing, and a rise in repair and remodeling investments. Moreover, market-leading businesses, innovative product and process technologies, as well as capabilities also contributed to the results. Its commercial and industrial markets are also registering improvements. Notably, all three of its businesses delivered double-digit EBIT margins for the second consecutive quarter.
Inside the Headlines
The company reported adjusted earnings of $1.90 per share, surpassing the Zacks Consensus Estimate of $1.13 by 36.7%. Moreover, the bottom line improved 68.1% year over year.
Net sales of $1.93 billion outpaced the consensus mark of $1.81 billion by 6.6% and increased 14% year over year. The upside was driven by robust revenue growth in Roofing and Composites businesses, partially overshadowed by soft sales growth in the Insulation business.
Owens Corning Inc Price, Consensus and EPS Surprise
Owens Corning Inc price-consensus-eps-surprise-chart | Owens Corning Inc Quote
Segment Details
Net sales in the Composites segment gained 14% year over year to $547 million. The company’s focus on higher-value downstream businesses and key geographies wherein it has a strong market position, as well as increasing manufacturing productivity continues to drive growth. However, earnings before interest and taxes (EBIT) margin of 11% contracted 100 basis points (bps) from the year-ago quarter’s 12%.
Insulation segment’s net sales were $728 million, up 1% year over year. Sales were impacted by slightly lower volumes owing to supply constraints and limited inventories, offset by higher U.S. residential new construction demand and increase in price realization. In technical and other insulation businesses, volumes improved on a sequential and year-over-year basis (marginally), driven primarily by strong performance in U.S. FOAMULAR and global mineral wool businesses. EBIT margin expanded 300 bps points year over year to 15% for the quarter. Positive manufacturing performance and higher selling prices in North American residential benefited the margin.
The Roofing segment’s net sales increased 33% year over year to $702 million driven by 36% volume growth, which was offset by lower third-party asphalt sales. Pricing in the quarter was flat. For the quarter under review, the company registered growth in the asphalt shingle market in the United States. EBIT margin expanded 1,000 bps year over year to 26% due to higher sales volumes in both shingles and roofing components, along with persistent deflationary impact of asphalt.
Operating Highlights
Adjusted EBIT for the quarter totaled $306 million, reflecting growth of 50% on a year-over-year.
2020 Highlights
Earnings came in at $5.21 per share for the year, up 14.8% from 2019. Net sales were $7.1 billion, down 1% from 2019. Adjusted EBIT was 878 million, marking a 6% improvement from 2019. Higher demand for products, combined with strong manufacturing performance and improved operating efficiencies, resulted in earnings growth for 2020 despite lower revenues.
Balance Sheet
As of Dec 31, 2020, the company had cash and cash equivalents of $717 million compared with $172 million at 2019-end. Long-term debt — net of current portion — totaled $3.13 billion, up from $2.99 billion at 2019-end.
Owens Corning had $1.8 billion of available liquidity at 2020-end. During 2020, it repaid the $200 million remaining on its term loan and contributed $122 million to global pension plans.
In the fourth quarter of 2020, net cash provided in operating activities was $418 million, down from $441 million a year ago. In 2020, the metric was $1.14 billion, up from $1.04 billion in 2019.
Free cash flow came in at $314 million for the quarter, up from $308 million a year ago. For the full year, the metric was $828 million, up from $590 million in 2019.
Through 2020, the company returned $396 million to shareholders in the form of share repurchases and dividends. At Dec 31, 2020, 9.5 million shares were available under the current authorization. On Dec 3, 2020, Owens Corning’s board of directors approved a share repurchase authorization for up to 10 million shares of the company’s common stock.
2021 Outlook
Owens Corning’s businesses are dependent on residential repair and remodeling activity, U.S. housing starts, global commercial construction activity, as well as global industrial production. Although the company expects the COVID-19 pandemic to continue to create market uncertainty, it anticipates persistent strength in the U.S. residential housing market, and recovery of commercial and industrial markets at a slower pace.
General corporate expenses are expected between $135 million and $145 million. Capital additions will be approximately $460 million, below depreciation and amortization of $480 million. Interest expense is estimated between $120 million and $130 million. The company estimates an effective tax rate of 26-28% and a cash tax rate of 18-20%, both on adjusted
pre-tax earnings.
Zacks Rank
Owens Corning — which shares space with Armstrong World Industries, Inc. (AWI - Free Report) , Gibraltar Industries, Inc. (ROCK - Free Report) and Installed Building Products, Inc. (IBP - Free Report) in the same industry — currently carries a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research SherazMian hand-picks one to have the most explosive upside of all.
You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.
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