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Owens Corning (OC) Down 8.7% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Owens Corning (OC - Free Report) . Shares have lost about 8.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Owens Corning due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Owens Corning Q4 Earnings Top, Tepid Q1 View
Owens Corning reported impressive results for fourth-quarter 2022. Quarterly earnings and net sales surpassed the Zacks Consensus Estimate and increased on a year-over-year basis. Despite lower volumes, high costs and unfavorable currency, strong pricing helped the company generate higher earnings.
Looking forward, Brian Chambers, OC’s board chair and chief executive officer, stated, “While we anticipate our markets in 2023 will be more challenging, we remain focused on outperforming the market and delivering value for our shareholders.”
Inside the Headlines
The company reported adjusted earnings of $2.49 per share, which topped the consensus mark of $2.34 by 6.4% and increased 13% from $2.20 a year ago. Net sales of $2.29 billion beat the consensus mark of $2.26 billion by 1.1% and increased 7% year over year. The uptick was mainly backed by the strength of the Insulation and Roofing businesses.
Segment Details
Net sales in the Composites segment decreased 3% year over year to $589 million. This was due to lower volumes and unfavorable currency translation, which were partially offset by higher selling prices. Earnings before interest and taxes (EBIT) margin of 11% contracted by 500 basis points (bps) from the year-ago quarter’s levels. Input cost inflation, reduced sales and the impact of production downtime and other manufacturing costs hurt margins.
The Insulation segment’s net sales came in at $956 million, up 11% year over year on higher selling prices and the acquisition of Natural Polymers, partially offset by lower volumes and unfavorable currency translation. EBIT increased to $153 million and the EBIT margin of 16% increased by 100 bps.
The Roofing segment’s net sales rose 12% year over year to $799 million, driven by higher selling prices and partially offset by lower sales volume. EBIT increased to $168 million. EBIT margin remained unchanged from the prior year at 21%. Higher selling prices were partially offset by cost inflation, primarily asphalt and other manufacturing costs and lower volumes.
Operating Highlights
Adjusted EBIT and adjusted EBITDA rose 2% each on a year-over-year basis. Adjusted EBIT margins remained flat from the year-ago figure of 15%, but adjusted EBITDA margin contracted 100 bps to 20%.
2022 Highlights
Adjusted earnings came in at $12.88 per share for the year, up 39% from 2021. Net sales were $9.76 billion, up 15% from the previous year. Adjusted EBIT and adjusted EBITDA rose 25% and 19% on a year-over-year basis, respectively. Both adjusted EBIT and adjusted EBITDA margins expanded by 100 bps.
Balance Sheet
As of Dec 31, 2022, the company had cash and cash equivalents of $1,099 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 2022, net cash provided by operating activities was $1,760 million compared with $1,503 million in 2021. Free cash flow came in at $1,314 million for the year, up from $1,087 million a year ago.
In 2022, the company returned $931 million to shareholders through dividends and share repurchases. It paid dividends of $136 million and repurchased 9.2 million shares of common stock for $795 million. In December 2022, OC announced an additional share repurchase authorization for up to 10 million shares of its common stock. At the end of 2022, 14.4 million shares were available under the combined authorization.
2023 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. The company expects challenges in many of its end markets due to inflationary pressure, higher interest rates and continued geopolitical uncertainties. For first-quarter 2023, it expects a moderate decline in net sales from the prior-year period and EBIT margins in the low- to mid-teens.
In 2023, general corporate expenses are expected to be between $195 million and $205 million. Capital additions are estimated at $520 million and depreciation and amortization within $520-$530 million. Interest expenses are estimated between $95 million and $105 million. The company projects an effective tax rate of 24-26% and a cash tax rate of 26-28%, both on adjusted earnings.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
At this time, Owens Corning has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. 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 upward for the stock, and the magnitude of these revisions looks promising. Notably, Owens Corning has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Owens Corning (OC) Down 8.7% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Owens Corning (OC - Free Report) . Shares have lost about 8.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Owens Corning due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Owens Corning Q4 Earnings Top, Tepid Q1 View
Owens Corning reported impressive results for fourth-quarter 2022. Quarterly earnings and net sales surpassed the Zacks Consensus Estimate and increased on a year-over-year basis. Despite lower volumes, high costs and unfavorable currency, strong pricing helped the company generate higher earnings.
Looking forward, Brian Chambers, OC’s board chair and chief executive officer, stated, “While we anticipate our markets in 2023 will be more challenging, we remain focused on outperforming the market and delivering value for our shareholders.”
Inside the Headlines
The company reported adjusted earnings of $2.49 per share, which topped the consensus mark of $2.34 by 6.4% and increased 13% from $2.20 a year ago. Net sales of $2.29 billion beat the consensus mark of $2.26 billion by 1.1% and increased 7% year over year. The uptick was mainly backed by the strength of the Insulation and Roofing businesses.
Segment Details
Net sales in the Composites segment decreased 3% year over year to $589 million. This was due to lower volumes and unfavorable currency translation, which were partially offset by higher selling prices. Earnings before interest and taxes (EBIT) margin of 11% contracted by 500 basis points (bps) from the year-ago quarter’s levels. Input cost inflation, reduced sales and the impact of production downtime and other manufacturing costs hurt margins.
The Insulation segment’s net sales came in at $956 million, up 11% year over year on higher selling prices and the acquisition of Natural Polymers, partially offset by lower volumes and unfavorable currency translation. EBIT increased to $153 million and the EBIT margin of 16% increased by 100 bps.
The Roofing segment’s net sales rose 12% year over year to $799 million, driven by higher selling prices and partially offset by lower sales volume. EBIT increased to $168 million. EBIT margin remained unchanged from the prior year at 21%. Higher selling prices were partially offset by cost inflation, primarily asphalt and other manufacturing costs and lower volumes.
Operating Highlights
Adjusted EBIT and adjusted EBITDA rose 2% each on a year-over-year basis. Adjusted EBIT margins remained flat from the year-ago figure of 15%, but adjusted EBITDA margin contracted 100 bps to 20%.
2022 Highlights
Adjusted earnings came in at $12.88 per share for the year, up 39% from 2021. Net sales were $9.76 billion, up 15% from the previous year. Adjusted EBIT and adjusted EBITDA rose 25% and 19% on a year-over-year basis, respectively. Both adjusted EBIT and adjusted EBITDA margins expanded by 100 bps.
Balance Sheet
As of Dec 31, 2022, the company had cash and cash equivalents of $1,099 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 2022, net cash provided by operating activities was $1,760 million compared with $1,503 million in 2021. Free cash flow came in at $1,314 million for the year, up from $1,087 million a year ago.
In 2022, the company returned $931 million to shareholders through dividends and share repurchases. It paid dividends of $136 million and repurchased 9.2 million shares of common stock for $795 million. In December 2022, OC announced an additional share repurchase authorization for up to 10 million shares of its common stock. At the end of 2022, 14.4 million shares were available under the combined authorization.
2023 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. The company expects challenges in many of its end markets due to inflationary pressure, higher interest rates and continued geopolitical uncertainties. For first-quarter 2023, it expects a moderate decline in net sales from the prior-year period and EBIT margins in the low- to mid-teens.
In 2023, general corporate expenses are expected to be between $195 million and $205 million. Capital additions are estimated at $520 million and depreciation and amortization within $520-$530 million. Interest expenses are estimated between $95 million and $105 million. The company projects an effective tax rate of 24-26% and a cash tax rate of 26-28%, both on adjusted earnings.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
At this time, Owens Corning has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. 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 upward for the stock, and the magnitude of these revisions looks promising. Notably, Owens Corning has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.