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Owens Corning (OC) Tops on Q2 Earnings, Stock Up on High Margins

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Owens Corning (OC - Free Report) reported solid second-quarter 2022 results. Its earnings and net sales surpassed their respective Zacks Consensus Estimate and increased on a year-over-year basis. The solid quarterly results were backed by strong demand across the markets served, structural improvements and strategic investments.

Owens Corning's shares inched up 2.1% on Jul 27, after the second-quarter earnings release.

Brian Chambers, OC’s chair and chief executive officer, stated, “For the second half of the year, we remain focused on delivering strong financial results and positioning the company for long-term success.”

Inside the Headlines

The company reported adjusted earnings of $3.83 per share, which beat the consensus mark of $3.32 by 15.4% and increased 43% from $2.68 a year ago.

Owens Corning Inc Price, Consensus and EPS Surprise

 

Owens Corning Inc Price, Consensus and EPS Surprise

Owens Corning Inc price-consensus-eps-surprise-chart | Owens Corning Inc Quote

 

Net sales of $2.6 billion topped the consensus mark of $2.59 billion by 0.6% and increased 16% year over year. The uptick was mainly backed by solid segmental results.

Segment Details

Net sales in the Composites segment increased 23% year over year to $719 million. The upside was driven by higher selling prices and the favorable impact of the customer mix. Earnings before interest and taxes (EBIT) margin of 21% increased 400 basis points (bps) from the year-ago quarter’s levels. The uptick can be attributed to higher selling prices and a favorable mix, partially offset by inflation and increased transportation costs.

The Insulation segment’s net sales came in at $719 million, up 16% year over year on higher selling prices and the favorable impact of the customer mix, partially offset by the negative impact of foreign currency. EBIT increased to $157 million and EBIT margin of 17% increased 300 bps.

The Roofing segment’s net sales rose 11% year over year to $1 billion, driven by higher selling prices partially offset by lower sales volumes. EBIT increased to $258 million. EBIT margin contracted 100 bps year over year to 25% due to input cost inflation, primarily from asphalt and other increased transportation costs.

Operating Highlights

Adjusted EBIT and adjusted EBITDA rose 29% and 24% on a year-over-year basis, respectively. Adjusted EBIT and adjusted EBITDA margins rose 200 and 100 bps from the year-ago period’s levels, respectively.

Balance Sheet

As of Jun 30, 2022, the company had cash and cash equivalents of $810 million compared with $959 million at the 2021-end. Long-term debt — net of current portion — totaled $2.99 billion, up from $2.96 billion at 2021-end.

In the second quarter, net cash provided by operating activities was $466 million compared with $498 million in the year-ago period. Free cash flow came in at $361 million for the second quarter, down from $405 million a year ago.

In the first half of 2022, the company returned $400 million to shareholders through dividends and share repurchases. The company repurchased 1 million shares of common stock for $86 million in the second quarter. At quarter-end, 9.9 million shares were available under the current authorization.

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 second quarter, the company expects the U.S. residential housing market and global commercial and industrial markets to remain positive while closely managing the ongoing impacts of inflation, supply chain disruptions and the COVID-19 pandemic.

For the third quarter, it expects net sales and adjusted EBIT to grow year over year.

For 2022, general corporate expenses are now expected to be between $170 million and $180 million versus $160-$170 million expected earlier. 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.

Zacks Rank

Owens Corning currently carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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