A month has gone by since the last earnings report for Owens Corning (OC Quick QuoteOC - Free Report) . Shares have lost about 0.7% in that time frame, underperforming the S&P 500.

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

Owens Corning’s Q4 Earnings & Sales Top

Owens Corning reported solid results for fourth-quarter 2021, wherein earnings and net sales surpassed their respective Zacks Consensus Estimate as well as improved on a year-over-year basis.

The solid quarterly results were backed by strong demand across the markets served and commercial and operational execution, despite supply chain disruptions and inflation.

Brian Chambers, OC’s chair and chief executive officer, said, “As we continue to focus on delivering outstanding near-term results, we are also investing to build Owens Corning for the future through our enterprise strategy which accelerates our growth, strengthens our earnings power, and creates additional value for our shareholders.”

Inside the Headlines

The company came up with fourth-quarter adjusted earnings of $2.20 per share, handily beating the consensus mark and improving 15.8% from $1.90 a year ago.

Net sales of $2.13 billion topped the consensus mark of $2.01 billion by 5.8% and increased 10.7% year over year. The uptrend was mainly backed by growth in all the three segments.

Segment Details

Net sales in the Composites segment increased 11% year over year to $608 million. The upside was driven by higher selling prices and the favorable impact of customer mix. Earnings before interest and taxes (EBIT) margin of 16% improved 500 basis points or bps from the year-ago quarter. The uptrend was mainly driven by improved production leverage and higher selling prices, partially offset by inflation and increased transportation costs.

The Insulation segment’s net sales came in at $863 million, up 19% year over year on higher selling prices and sales volumes. EBIT margin remained stable at 15%.

The Roofing segment’s net sales inched up 1% year over year to $712 million. Higher selling prices were largely offset by lower sales volumes and unfavorable product mix. EBIT margin contracted 500 bps year over year to 21% due to lower sales volumes and unfavorable product mix. Higher selling prices offset input cost inflation, primarily from asphalt and other petroleum-based products, and increased transportation costs.

Operating Highlights

Adjusted EBIT and adjusted EBITDA rose 6.2% and 5.6% on a year-over-year basis, respectively. Adjusted EBIT and adjusted EBITDA margins, however, contracted 100 bps from the year-ago period.

2021 Highlights

Adjusted earnings came in at $9.29 per share for the year, up 78.3% from 2020. Net sales were $8.5 billion, up 20.4% from 2020. Adjusted EBIT and adjusted EBITDA rose 61.2% and 40.9% on a year-over-year basis, respectively. Adjusted EBIT and adjusted EBITDA margin also improved 500 and 300 bps, respectively.

Balance Sheet

As of Dec 31, 2021, the company had cash and cash equivalents of $959 million compared with $717 million at 2020-end. Long-term debt — net of current portion — totaled $2.96 billion, up from $3.13 billion at 2020-end.

For 2021, net cash provided by operating activities was $1,503 million compared with $1,135 million in the comparable year-ago period. Free cash flow came in at $162 million for the fourth quarter and $1,087 million for 2021, up from $314 million and $$828 million a year ago, respectively.

On Feb 14, OC announced a share repurchase authorization for up to 10 million shares of the company’s common stock. At 2021-end, 3.4 million shares were available for repurchase under the previous authorization. Also, on Feb 3, it unveiled a 35% increase in its quarterly cash dividend to 35 cents per share.

First-Quarter 2022 Outlook

Owens Corning's businesses primarily depend on residential repair and remodeling activity, U.S. housing starts, global commercial construction activity, and global industrial production.

For the first quarter, the company expects the U.S. residential housing market and global commercial and industrial markets to remain strong, while closely managing the ongoing impacts of inflation, supply chain disruptions, and the COVID-19 pandemic. It expects net sales and adjusted EBIT to grow year over year for the said quarter.

2022 View

For 2022, general corporate expenses are expected between $160 million and $170 million. Capital additions are estimated at $480 million, below the anticipated depreciation and amortization of $520 million. Interest expenses are estimated between $115 million and $125 million. The company estimates an effective tax rate of 25-27% and a cash tax rate of 22-24%, both on adjusted earnings.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

The consensus estimate has shifted 47.56% due to these changes.

VGM Scores

Currently, Owens Corning has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. 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.

Outlook

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.