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Product innovation Aids Owens Corning (OC), High Costs Ail
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Owens Corning (OC - Free Report) is benefiting from robust demand for its Roofing business, positive pricing efforts and product innovation. Also, the emphasis on strategic initiatives and acquisitions bodes well.
The Zacks Rank #3 (Hold) company has a long-term earnings growth rate of 26.1%, which highlights its strength. The growth prospect is further solidified with a VGM Score of A, backed by Growth and Value Score of A. The positive trend signifies bullish analysts’ sentiments, robust fundamentals and prospects of an outperformance in the near term.
Higher input costs and increasing pressure in some of the industrial and international markets are concerns for the company's growth prospects. The company’s 2024 sales and earnings are likely to decline year over year by 0.6% and 2.4%, respectively.
Image Source: Zacks Investment Research
Shares of Owens Corning have increased 7.4% in the past three months compared with the Zacks Building Products – Miscellaneous industry’s 14.4% growth.
Let’s discuss the driving factors amid ongoing headwinds.
Factors Driving Growth
Solid Roofing Business: Owens Corning’s business has been experiencing strength in the Roofing business. During the fourth quarter of 2023, the segment delivered strong top and bottom-line performance. On a year-over-year basis, sales increased 16%, driven by strong demand tied to the mild weather extending the roofing season in many regions, strong components attachment rate, a favorable mix and a positive price.
For the first quarter of 2024, the company expects segment revenues to be up by low single digits. The segment’s revenues was $895 million in the year ago quarter.
Based on the robust market conditions and the continued demand from storm carryover, OC anticipates that Asphalt Roofing Manufacturers Association (ARMA) market shipments could see a rise of approximately 20% from last year’s levels. However, the company expects its volumes to trail behind ARMA shipments in the first quarter. This is primarily due to OC's outstanding performance in the year ago quarter, during which distributors were replenishing their inventory of OC products.
Product Innovation to Drive Growth: Owens Corning has been actively investing in accelerating new product and process innovation to support customers and foster additional growth. In 2023, OC continued to accelerate its product and process innovation, unveiling 39 newer or refreshed products across core platforms in Roofing, Insulation and Composite businesses. The innovations focused on enhancing product performance and durability, delivering added value to customers for market success.
The company is expanding its product range, including the multi-material system sell around roofing, such as hip and ridge, starter and ventilation products. These additions contribute to a higher mix of high-margin items, consequently boosting overall margins.
Focus on Acquisitions Bode Well: The company is assessing its investment in bolt-on acquisitions that leverage its commercial, operational and geographic strength and expand its functional areas of offering.
On Feb 9, 2024, the company announced the acquisition of Masonite and the strategic review of its glass reinforcements business. These steps represent significant advancements in strengthening its position in building and construction materials and expanding its portfolio of branded residential products. The company is optimistic about entering the residential doors category with the acquisition of a market leader in this space. The strategic acquisition not only boosts OC's revenue potential but presents opportunities for margin expansion.
Concerns
OC is highly dependent on housing market demand. The overall construction and related industries have witnessed inflationary pressure in material, energy and transportation.
In 2023, the company's net sales and EBIT decreased year over year due to lower volumes and the net impact of divestitures and acquisitions. Input costs were also inflationary during the year, largely offset by favorable delivery cost. In the fourth quarter, restructuring, acquisition and divestiture-related costs were $63 million.
For first-quarter 2024, OC expects most of its building and construction end markets to be relatively stable in the near term amid unfavorable macroeconomic trends outside of the United States and elevated interest rates. For the Insulation business, OC expects input materials to witness inflation, partially offset by favorable delivery costs.
Zacks Rank
Here are some better-ranked stocks from the Construction sector.
NVR delivered a trailing four-quarter earnings surprise of 8.1%, on average. The stock has gained 32.3% in the past six months. The Zacks Consensus Estimate for NVR’s 2024 sales and earnings per share (EPS) indicates growth of 7.7% and 4.6%, respectively, from the prior-year levels.
Vulcan Materials Company (VMC - Free Report) currently sports a Zacks Rank of 1. VMC delivered a trailing four-quarter earnings surprise of 19.5%, on average. The stock has gained 32.9% in the past six months.
The Zacks Consensus Estimate for VMC’s 2024 sales and EPS indicates an improvement of 1.4% and 19.4%, respectively, from a year ago.
Sterling Infrastructure, Inc. (STRL - Free Report) presently sports a Zacks Rank of 1. It has a trailing four-quarter earnings surprise of 20.4%, on average. Shares of STRL have increased 50.7% in the past six months.
The Zacks Consensus Estimate for STRL’s 2024 sales and EPS indicates a rise of 11.7% and 11.4%, respectively, from the prior-year levels.
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Product innovation Aids Owens Corning (OC), High Costs Ail
Owens Corning (OC - Free Report) is benefiting from robust demand for its Roofing business, positive pricing efforts and product innovation. Also, the emphasis on strategic initiatives and acquisitions bodes well.
The Zacks Rank #3 (Hold) company has a long-term earnings growth rate of 26.1%, which highlights its strength. The growth prospect is further solidified with a VGM Score of A, backed by Growth and Value Score of A. The positive trend signifies bullish analysts’ sentiments, robust fundamentals and prospects of an outperformance in the near term.
Higher input costs and increasing pressure in some of the industrial and international markets are concerns for the company's growth prospects. The company’s 2024 sales and earnings are likely to decline year over year by 0.6% and 2.4%, respectively.
Image Source: Zacks Investment Research
Shares of Owens Corning have increased 7.4% in the past three months compared with the Zacks Building Products – Miscellaneous industry’s 14.4% growth.
Let’s discuss the driving factors amid ongoing headwinds.
Factors Driving Growth
Solid Roofing Business: Owens Corning’s business has been experiencing strength in the Roofing business. During the fourth quarter of 2023, the segment delivered strong top and bottom-line performance. On a year-over-year basis, sales increased 16%, driven by strong demand tied to the mild weather extending the roofing season in many regions, strong components attachment rate, a favorable mix and a positive price.
For the first quarter of 2024, the company expects segment revenues to be up by low single digits. The segment’s revenues was $895 million in the year ago quarter.
Based on the robust market conditions and the continued demand from storm carryover, OC anticipates that Asphalt Roofing Manufacturers Association (ARMA) market shipments could see a rise of approximately 20% from last year’s levels. However, the company expects its volumes to trail behind ARMA shipments in the first quarter. This is primarily due to OC's outstanding performance in the year ago quarter, during which distributors were replenishing their inventory of OC products.
Product Innovation to Drive Growth: Owens Corning has been actively investing in accelerating new product and process innovation to support customers and foster additional growth. In 2023, OC continued to accelerate its product and process innovation, unveiling 39 newer or refreshed products across core platforms in Roofing, Insulation and Composite businesses. The innovations focused on enhancing product performance and durability, delivering added value to customers for market success.
The company is expanding its product range, including the multi-material system sell around roofing, such as hip and ridge, starter and ventilation products. These additions contribute to a higher mix of high-margin items, consequently boosting overall margins.
Focus on Acquisitions Bode Well: The company is assessing its investment in bolt-on acquisitions that leverage its commercial, operational and geographic strength and expand its functional areas of offering.
On Feb 9, 2024, the company announced the acquisition of Masonite and the strategic review of its glass reinforcements business. These steps represent significant advancements in strengthening its position in building and construction materials and expanding its portfolio of branded residential products. The company is optimistic about entering the residential doors category with the acquisition of a market leader in this space. The strategic acquisition not only boosts OC's revenue potential but presents opportunities for margin expansion.
Concerns
OC is highly dependent on housing market demand. The overall construction and related industries have witnessed inflationary pressure in material, energy and transportation.
In 2023, the company's net sales and EBIT decreased year over year due to lower volumes and the net impact of divestitures and acquisitions. Input costs were also inflationary during the year, largely offset by favorable delivery cost. In the fourth quarter, restructuring, acquisition and divestiture-related costs were $63 million.
For first-quarter 2024, OC expects most of its building and construction end markets to be relatively stable in the near term amid unfavorable macroeconomic trends outside of the United States and elevated interest rates. For the Insulation business, OC expects input materials to witness inflation, partially offset by favorable delivery costs.
Zacks Rank
Here are some better-ranked stocks from the Construction sector.
NVR, Inc. (NVR - Free Report) currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NVR delivered a trailing four-quarter earnings surprise of 8.1%, on average. The stock has gained 32.3% in the past six months. The Zacks Consensus Estimate for NVR’s 2024 sales and earnings per share (EPS) indicates growth of 7.7% and 4.6%, respectively, from the prior-year levels.
Vulcan Materials Company (VMC - Free Report) currently sports a Zacks Rank of 1. VMC delivered a trailing four-quarter earnings surprise of 19.5%, on average. The stock has gained 32.9% in the past six months.
The Zacks Consensus Estimate for VMC’s 2024 sales and EPS indicates an improvement of 1.4% and 19.4%, respectively, from a year ago.
Sterling Infrastructure, Inc. (STRL - Free Report) presently sports a Zacks Rank of 1. It has a trailing four-quarter earnings surprise of 20.4%, on average. Shares of STRL have increased 50.7% in the past six months.
The Zacks Consensus Estimate for STRL’s 2024 sales and EPS indicates a rise of 11.7% and 11.4%, respectively, from the prior-year levels.