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Owens Corning's (OC) Q1 Earnings Top Estimates, Shares Up
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Owens Corning (OC - Free Report) reported impressive earnings in first-quarter 2020. The bottom line surpassed the Zacks Consensus Estimate and improved on a year-over-year basis.
Shares of the company gained 11.8% on Apr 29, post the announcement of strong results in the first quarter. The company provided updates on cost-saving initiatives but revoked its previously provided segmental guidance.
Inside the Headlines
The company reported adjusted earnings of 60 cents per share, which beat the consensus mark of 56 cents by 7.1%. Also, the bottom line increased 13.2% year over year.
Owens Corning Inc Price, Consensus and EPS Surprise
Net sales of $1.6 billion lagged the consensus mark of $1.65 billion by 3% and declined 4% year over year. Also, the metric declined 3% on a constant-currency (cc) basis. The downside was mainly due to lower Roofing volumes, primarily owing to lesser storm demand carryover and reduced shipments to distributors.
Segment Details
Net sales in the Composites segment dropped 4% year over year to $494 million. Segment sales were down 2% at on a constant-currency basis primarily due to pricing-related headwinds. Volumes improved slightly from a year ago, as growth in downstream specialty applications were more than offset by declines in glass demand in Asia Pacific due to COVID-19 impacts.
Earnings before interest and taxes (EBIT) margin in the quarter contracted 200 basis points (bps) from the year-ago figure. Continued strength in the manufacturing business was offset by negative impacts of balancing production with demand.
Insulation segment’s net sales came in at $603 million, up 2% year over year and 4% on a cc basis. The upside was mainly driven by strong volume growth across all categories except China, which was affected by COVID-19. However, this was offset by lower selling prices.
EBIT margin surged 300 bps to 6%, driven by higher sales volumes, favorable manufacturing performance and lower curtailment costs.
The Roofing segment’s net sales declined 10% year over year to $555 million, thanks to lower shingle volumes stemming from lack of storm carryover in the quarter along with reduced shipments to distributors in March. EBIT margin remained flat year over year at 12%.
Operating Highlights
During the reported quarter, adjusted EBIT came in at $116 million, flat on a year-over-year basis. Improvement in the Insulation business was offset by softness in Composites and Roofing segments.
Balance Sheet
As of Mar 31, 2020, the company had cash and cash equivalents of $234 million compared with $172 million at 2019-end.
The company had $908 million of available liquidity as of Mar 31. During the quarter, it borrowed $400 million on the existing revolving credit facility to strengthen its cash position. Meanwhile, its $150 million of term loan is likely to mature in February 2021.
Net cash used in operating activities was $52 million, down from $151 million in the year-ago quarter.
In the first quarter, the company bought back 1.3 million shares of common stock for $81 million. At the quarter-end, 2.3 million shares were available for repurchase under the current authorization. Notably, the company returned $133 million to shareholders via share repurchases and dividend payouts.
Updated 2020 Outlook
Owens Corning’s businesses are witnessing negative trends in global industrial production, U.S. housing starts, and global commercial and industrial construction activities. It projects the COVID-19 outbreak to impact the previously provided expectations for the segment.
Nonetheless, the company has been reducing costs, minimizing capital expenditures and managing working capital.
The company now expects general corporate expenses in the range of $100-$120 million compared with $125-$135 million expected earlier. Capital additions are expected in the range of $150-$200 million, lower than depreciation and amortization of $460 million. It continues to expect strong conversion of adjusted earnings to free cash flow.
Interest expenses are likely to be between $120 million and $125 million compared with $115 million projected earlier. Owens Corning estimates an effective tax rate of 26-28%.
Zacks Rank & Peer Release
Owens Corning — which shares space with United Rentals, Inc. (URI - Free Report) and Installed Building Products, Inc. (IBP - Free Report) in the same industry — currently carries a Zacks Rank #4 (Sell).
Masco Corporation’s (MAS - Free Report) first-quarter 2020 earnings and revenues beat the respective Zacks Consensus Estimate and improved year over year. The upside can be attributed to strong contributions from North American plumbing products, and paint and other coatings products.
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Owens Corning's (OC) Q1 Earnings Top Estimates, Shares Up
Owens Corning (OC - Free Report) reported impressive earnings in first-quarter 2020. The bottom line surpassed the Zacks Consensus Estimate and improved on a year-over-year basis.
Shares of the company gained 11.8% on Apr 29, post the announcement of strong results in the first quarter. The company provided updates on cost-saving initiatives but revoked its previously provided segmental guidance.
Inside the Headlines
The company reported adjusted earnings of 60 cents per share, which beat the consensus mark of 56 cents by 7.1%. Also, the bottom line increased 13.2% year over year.
Owens Corning Inc Price, Consensus and EPS Surprise
Owens Corning Inc price-consensus-eps-surprise-chart | Owens Corning Inc Quote
Net sales of $1.6 billion lagged the consensus mark of $1.65 billion by 3% and declined 4% year over year. Also, the metric declined 3% on a constant-currency (cc) basis. The downside was mainly due to lower Roofing volumes, primarily owing to lesser storm demand carryover and reduced shipments to distributors.
Segment Details
Net sales in the Composites segment dropped 4% year over year to $494 million. Segment sales were down 2% at on a constant-currency basis primarily due to pricing-related headwinds. Volumes improved slightly from a year ago, as growth in downstream specialty applications were more than offset by declines in glass demand in Asia Pacific due to COVID-19 impacts.
Earnings before interest and taxes (EBIT) margin in the quarter contracted 200 basis points (bps) from the year-ago figure. Continued strength in the manufacturing business was offset by negative impacts of balancing production with demand.
Insulation segment’s net sales came in at $603 million, up 2% year over year and 4% on a cc basis. The upside was mainly driven by strong volume growth across all categories except China, which was affected by COVID-19. However, this was offset by lower selling prices.
EBIT margin surged 300 bps to 6%, driven by higher sales volumes, favorable manufacturing performance and lower curtailment costs.
The Roofing segment’s net sales declined 10% year over year to $555 million, thanks to lower shingle volumes stemming from lack of storm carryover in the quarter along with reduced shipments to distributors in March. EBIT margin remained flat year over year at 12%.
Operating Highlights
During the reported quarter, adjusted EBIT came in at $116 million, flat on a year-over-year basis. Improvement in the Insulation business was offset by softness in Composites and Roofing segments.
Balance Sheet
As of Mar 31, 2020, the company had cash and cash equivalents of $234 million compared with $172 million at 2019-end.
The company had $908 million of available liquidity as of Mar 31. During the quarter, it borrowed $400 million on the existing revolving credit facility to strengthen its cash position. Meanwhile, its $150 million of term loan is likely to mature in February 2021.
Net cash used in operating activities was $52 million, down from $151 million in the year-ago quarter.
In the first quarter, the company bought back 1.3 million shares of common stock for $81 million. At the quarter-end, 2.3 million shares were available for repurchase under the current authorization. Notably, the company returned $133 million to shareholders via share repurchases and dividend payouts.
Updated 2020 Outlook
Owens Corning’s businesses are witnessing negative trends in global industrial production, U.S. housing starts, and global commercial and industrial construction activities. It projects the COVID-19 outbreak to impact the previously provided expectations for the segment.
Nonetheless, the company has been reducing costs, minimizing capital expenditures and managing working capital.
The company now expects general corporate expenses in the range of $100-$120 million compared with $125-$135 million expected earlier. Capital additions are expected in the range of $150-$200 million, lower than depreciation and amortization of $460 million. It continues to expect strong conversion of adjusted earnings to free cash flow.
Interest expenses are likely to be between $120 million and $125 million compared with $115 million projected earlier. Owens Corning estimates an effective tax rate of 26-28%.
Zacks Rank & Peer Release
Owens Corning — which shares space with United Rentals, Inc. (URI - Free Report) and Installed Building Products, Inc. (IBP - Free Report) in the same industry — currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Masco Corporation’s (MAS - Free Report) first-quarter 2020 earnings and revenues beat the respective Zacks Consensus Estimate and improved year over year. The upside can be attributed to strong contributions from North American plumbing products, and paint and other coatings products.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>