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Why Is Owens Corning (OC) Up 0.1% Since Last Earnings Report?

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A month has gone by since the last earnings report for Owens Corning (OC - Free Report) . Shares have added about 0.1% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Owens Corning due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Owens Corning Q2 Earnings & Revenues Beat, Volumes High

Owens Corning reported impressive results for second-quarter 2021. The top and the bottom line surpassed the Zacks Consensus Estimate and improved significantly on a year-over-year basis. The solid quarterly result was backed by strong volumes, broad price realization and high manufacturing efficiencies across businesses.

Chair and CEO Brian Chambers said, "Owens Corning delivered another outstanding quarter generating record results with all three businesses continuing to perform well in a dynamic market environment. These results were driven by strong, consistent commercial and operational execution and demonstrate the exceptional capability of our global team and earnings power of our company."

Inside the Headlines

The company reported adjusted earnings of $2.60 per share, surpassing the consensus mark of $2.10 by 23.8%. Also, the said metric improved nearly 186% year over year.

Net sales of $2.2 billion topped the consensus mark of $1.97 billion by 13.5% and increased 37.8% year over year. The uptrend was mainly backed by a robust U.S. residential housing market, and stronger commercial and industrial markets.

Segment Details

Net sales in the Composites segment increased 46% year over year to $583 million. Segment sales were up primarily on the back of 30% volume growth.

Earnings before interest and taxes (EBIT) margin of 17% improved significantly from 2% reported in the year-ago quarter.

Insulation segment’s net sales came in at $806 million, up 35% year over year. The solid improvement was mainly owing to strong volume, favorable pricing and currency benefits. EBIT margin also expanded a whopping 900 bps to 14%.

The Roofing segment’s net sales jumped 35% year over year to $917 million. The U.S. asphalt shingle market grew 19% from the year-ago level as U.S. shingle volumes were better than expected on a stronger manufacturing performance. High realization on the back of previously announced price increases helped price/costs remain positive during the quarter. Yet, it is still facing additional materials and transportation inflation. EBIT margin expanded 400 bps year over year to 26%.

Operating Highlights

Adjusted EBIT during the quarter totaled $408 million, up 144.3% on a year-over-year basis owing to margin improvement across the segments.

Balance Sheet

As of Jun 30, 2021, the company had cash and cash equivalents of $888 million compared with $717 million at 2020 end. Long-term debt — net of current portion — totaled $3.14 billion, up from $3.13 billion at 2020 end. Owens Corning had $2 billion of available liquidity at first-quarter 2021 end.

In the first half of 2021, net cash provided by operating activities was $702 million compared with $229 million a year ago. Free cash flow came in at $405 million for the reported quarter, up from $233 million a year ago.

During second-quarter 2021, the company repurchased 1.3 million shares of common stock for $131 million. It returned $318 million to its shareholders through share repurchases and dividends. At second quarter-end, 6.6 million shares were available for repurchase under the current authorization.

Third-Quarter 2021 Outlook

For the ongoing quarter, the company expects the U.S. residential market to remain strong, and the commercial and industrial markets to continue to strengthen.

Insulation:  For the North American residential fiberglass insulation business, the company expects the volume to be up 10% from last-year levels with additional price realization. In the technical and other building insulation businesses, volumes are expected to rise 10% from the third-quarter 2020 reading with increasing demand for its products in global building and construction applications. The Insulation business is expected to benefit from a $20-million fixed cost absorption while facing comparatively higher material and transportation inflation. EBIT margins are expected to expand in mid-teens.

Composites:  The company anticipates volumes to be flat year over year. Yet, revenues are likely to improve year over year on improvement in sales mix and additional price realization, given its strong commercial work. The price is expected to rise in mid-single digits from the prior-year level. The business is likely to benefit from $30 million of curtailment reversals. Additionally, continued favorable productivity may partially offset the input material and transportation inflation while margins are projected in the mid-teens range, nearing second-quarter numbers.

Roofing: The company expects both the market and volumes to be relatively flat in the third quarter from the prior-year tally. Pricing is likely to improve during the quarter, given the previously-announced price increases. Inflation in asphalt and other material inputs is likely to be more significant in the second half. To overcome this inflation, management announced a price increase of 5-7% effective August-end.  Roofing EBIT margin is likely to rise 25% as price/cost mix remains positive.

2021 Outlook

Owens Corning’s businesses are dependent on its residential repair and remodeling activity, U.S. housing starts, global commercial construction activity as well as global industrial production. The company expects the U.S. residential housing market to remain robust, and the commercial and industrial markets to strengthen.

General corporate expenses are now expected between $150 million and $155 million compared with $135-$145 million expected earlier. Capital additions are estimated approximately at $460 million, below the anticipated depreciation and amortization of $500 million (up from the prior projection of $480 million). Interest expenses are 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.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 9.1% due to these changes.

VGM Scores

At this time, Owens Corning has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.


Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Owens Corning has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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