A month has gone by since the last earnings report for Owens Corning (OC Quick QuoteOC - Free Report) . Shares have added about 16.1% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important drivers.

Owens Corning Q3 Earnings Beat Estimates

Owens Corning reported mixed results for third-quarter 2023, wherein earnings surpassed the Zacks Consensus Estimate and increased on a year-over-year basis. Net sales missed the consensus mark and declined from the prior year. Sales declined due to lower sales volumes in both the Insulation and Composites segments, partially offset by higher selling prices.

Inside the Headlines

The company reported adjusted earnings of $4.15 per share, which topped the consensus mark of $3.78 by 9.8% and increased 15% from $3.61 a year ago. Net sales of $2.48 billion missed the consensus mark of $2.52 billion by 1.7% and declined 2% year over year.

Segment Details

Net sales in the Composites segment decreased 11% year over year to $567 million. This was due to 9% lower volumes and price declines resulting from lower spot prices in glass reinforcements. Earnings before interest and taxes (“EBIT”) margin contracted to 14% from 20% in the year-ago period. EBITDA margins of 22% also declined from 26% reported a year ago.

The Insulation segment’s net sales came in at $913 million, down 5% year over year on 10% lower volumes in both the North American residential insulation and technical and global insulation businesses, partially offset by positive price realization. EBIT and EBITDA margins of 16% and 22%, respectively, decreased by 200 and 100 basis points (bps), respectively, on lower volumes and planned maintenance downtime and production investments, partially offset by positive price realization.

The Roofing segment’s net sales rose 8% year over year to $1,084 million, driven by strong demand in several markets backed by higher levels of storm activity, as well as favorable mix and positive price. Both EBIT and EBITDA margins expanded by 900 bps to 32% and 33%, respectively, driven by positive price/cost as well as higher volumes.

Operating Highlights

Adjusted EBIT and adjusted EBITDA improved 6.4% and 5.9%, respectively, on a year-over-year basis. Adjusted EBIT and adjusted EBITDA margin expanded by 200 bps, each from the year-ago figure.

Balance Sheet

As of Sep 30, 2023, the company had cash and cash equivalents of $1,323 million compared with $1,099 million at the 2022-end. Long-term debt — net of the current portion — totaled $3 billion, up from $2.99 billion at 2022-end.

In the first nine months of 2023, net cash used in operating activities was $1,021 million versus net cash provided by operating activities of $1,085 million in the previous year. Free cash flow came in at $581 million for the reported period compared with $367 million a year ago.

In the third quarter, the company returned $187 million to shareholders through dividends and share repurchases. At the end of the third quarter, 10.8 million shares were available for repurchase under the current authorization.

Q4 Outlook

Owens Corning's businesses primarily depend on residential repair and remodeling activity, U.S. housing starts, global commercial construction activity and industrial production. The company expects challenges in many of its end markets due to inflationary pressures, increased interest rates and continued geopolitical uncertainties. For the fourth quarter of 2023, the company expects net sales to remain slightly below year over year and EBIT margins in the mid-teens compared with 15% reported in the prior-year quarter.

For the quarter, the company expects revenues in the Insulation segment to be down by mid-single digits compared with the prior year’s value of $956 million. The EBIT margins are expected to be in the mid-teens compared with 16% in the year-ago quarter.

For the Composites segment, revenues are anticipated to be down by high-single digits compared with $589 million reported in the prior-year quarter. The EBIT margins are expected to be in mid to high single-digit range versus 11% reported a year ago.

For the Roofing segment, revenues are expected to be up by mid to high-single digits in comparison with $799 million year over year. The EBIT margins are expected to be mid to high 20% compared with the reported fourth-quarter 2022 margin of 21%.

2023 Outlook

For 2023, the company expects general corporate expenses to be at the higher end of $215-$225 million. Interest expenses are now estimated to be between $70 million and $80 million. Capital additions are estimated at an approximate value of $520 million and depreciation and amortization within $510-$520 million. The company projects an effective tax rate of 24-26% and a cash tax rate of 26-28% on adjusted earnings.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

Currently, Owens Corning has an average Growth Score of C, though it is lagging a bit 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 20% 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 broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Owens Corning has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Owens Corning belongs to the Zacks Building Products - Miscellaneous industry. Another stock from the same industry, Armstrong World Industries (AWI Quick QuoteAWI - Free Report) , has gained 13.9% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.

Armstrong World Industries reported revenues of $347.3 million in the last reported quarter, representing a year-over-year change of +6.9%. EPS of $1.60 for the same period compares with $1.36 a year ago.

For the current quarter, Armstrong World Industries is expected to post earnings of $1.03 per share, indicating a change of -4.6% from the year-ago quarter. The Zacks Consensus Estimate has changed -2.6% over the last 30 days.

Armstrong World Industries has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.