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Owens Corning (OC) Up 8% Since Earnings: More Upside Left?

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It has been more than two weeks since Owens Corning (OC - Free Report) came up with first-quarter 2022 results, and the stock is still rallying. The recent increase in share price is a huge relief for investors as the stock has long been out of favor owing to supply-chain hurdles that have impacted its margins.

Owens Corning and other industry players have been witnessing supply-chain disruptions and significant inflation in material and transportation. While positive prices more than offset the inflation headwinds in first-quarter 2022, the company acknowledges that inflation continues to impact energy costs and nearly all material input costs, especially asphalt and other petroleum-based materials, along with transportation.

Let’s delve deeper and find out the factors aiding the surge.

Sturdy Q1 Results

Shares of Owens Corning, which have witnessed a sharp decline of 12.3% in a year, took a sharp U-turn following the earnings release on Apr 27. Since then, OC shares have gained nearly 8.2%. The bullish run helped it maintain its stance in outperforming the industry during the period. The stock has gained 8.2% while the industry has remained flat since its earnings release.
 

Zacks Investment Research
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Owens Corning reported robust financial numbers in first-quarter 2022, with earnings and net sales beating the Zacks Consensus Estimate by 17.4% and 5.4%, respectively. Notably, this marked the 12 consecutive earnings beat. The company’s first-quarter earnings of $2.84 per share increased sharply by 59% from $1.79 reported in the year-ago quarter. Its earnings were driven by higher sales and effective cost management efforts. Net sales of $2.346 billion increased 23% year over year. The uptick was mainly backed by solid segmental results. Adjusted EBIT and adjusted EBITDA margins rose 300 and 200 basis points (bps) from the year-ago period, respectively.

Upbeat View

Looking forward, management expects demand in the second quarter to remain robust. The company envisions U.S. residential and commercial markets, as well as global building and construction end markets, to remain strong. Based on the current trends, it also anticipates inflation across OC’s business segments to continue accelerating in the quarter. Even with higher inflation, OC expects to maintain positive price costs in each of its businesses in Q2 as it realizes the improvements from the previously announced pricing actions.

Expansion of Products Offerings to Drive Stock Further

The company continues to invest in new insulation materials and systems in non-residential applications to expand its global product offerings. During first-quarter 2022, the company launched 16 new or refreshed products across global businesses. These products span core product platforms, including roofing shingles and components, insulation XPS foam and mineral wool, non-woven, and other composite materials.

Acquisitions

Acquisitions are vital to Owens Corning’s growth strategy. In April 2022, Owens Corning signed a deal with JR Plastics Corporation to acquire WearDeck, a premium producer of composite weather-resistant decking for commercial and residential applications. This buyout would advance the company’s strategy to pivot its Composites business to focus on higher-value material solutions within the building and construction industry.

Favorable Estimate Revisions

Following OC’s sturdy performance, the Zacks Consensus Estimate witnessed an uptrend as analysts raised their estimates. Analysts polled by Zacks are convinced that this Zacks Rank #3 (Hold) stock will see robust performance in the future as well. In the past 30 days, the Zacks Consensus Estimate for 2022 jumped from $1.27 to $11.65. The estimated figure indicates 25.4% year-over-year growth.

3 Construction Stocks Hogging the Limelight

Better-ranked stocks, which warrant a look in the Construction sector, include Patrick Industries (PATK - Free Report) , Beazer Homes USA (BZH - Free Report) and NVR, Inc. (NVR - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Patrick Industries is a leading component solutions provider for the RV, marine, and manufactured housing industries. Patrick Industries, like many others in the broader RV and consumer marine space, is amid a massive run of revenue growth that began about a decade ago.

Patrick Industries’ expected earnings growth rate for 2022 is 36.7%. The Zacks Consensus Estimate for current-year earnings has improved 19.7% over the past 30 days.

Beazer Homes designs, builds and sells single-family homes. BZH designs homes to appeal primarily to entry-level and first move-up homebuyers. Beazer Homes USA’s objective is to provide customers with homes that have quality and value. BZH’s subsidiary, Beazer Mortgage, originates the mortgages for the company's homebuyers.

Beazer Homes’ expected earnings growth rate for fiscal 2022 is 48.9%. The Zacks Consensus Estimate for current-year earnings has improved 15% over the past 30 days.

NVR is engaged in the construction and sale of single-family detached homes, townhomes and condominium buildings, all of which are primarily constructed on a pre-sold basis. In order to serve homebuilding customers, NVR operates a mortgage banking and title services business. NVR operates in two business segments:  Homebuilding and Mortgage Banking.

NVR’s expected earnings growth rate for the current year is 68.4%. The Zacks Consensus Estimate for current-year earnings has improved 20.4% over the past 30 days.