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Owens Corning (OC) Rises 65% in a Year: Will the Momentum Last?
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Owens Corning (OC - Free Report) is capitalizing on strong demand for its Roofing business along with ongoing product innovation and effective pricing strategies. Additionally, OC is benefiting from reduced input and manufacturing costs, further bolstering its profitability. Moreover, strategic initiatives and targeted acquisitions are reinforcing its market position and contributing to its overall success.
Shares of this Toledo, OH-based building materials systems and composite solutions provider have rallied 64.6% over the past year, outperforming the Zacks Building Products – Miscellaneous industry’s 55.8% rise.
The Zacks Consensus Estimate has witnessed an uptrend over the past 30 days as analysts raised their estimates, depicting optimism about the stock’s growth potential. Over the said time frame, the Zacks Consensus Estimate for 2024 earnings per share (EPS) has increased to $15.37 from $13.77. The estimated figure indicates 6.6% year-over-year growth.
Image Source: Zacks Investment Research
The growth prospect of this current Zacks Rank #2 (Buy) company is further solidified with a VGM Score of A, backed by a Value, Growth and Momentum Score of A, B and B, respectively. The positive trend signifies bullish analysts’ sentiments and robust fundamentals in the near term.
What Makes the Stock Attractive
Product Innovation: Owens Corning is driving growth through relentless product innovation. In the first quarter of 2024, it launched 13 new or improved products, including the PINKWRAP weather-resistant barrier house wrap in its Roofing business. Leveraging its manufacturing prowess and strong industry relationships, Owens Corning anticipates significant growth in this category. In 2023, the company introduced 39 newer or refreshed products across the Roofing, Insulation, and Composite divisions, all aimed at enhancing performance and durability. Additionally, Owens Corning is expanding its product range to include multi-material systems for roofing, such as hip and ridge, starter, and ventilation products, enriching its offerings and boosting margins with high-margin items. This strategic focus on innovation underscores Owens Corning's commitment to meeting customer needs and driving market success.
Inorganic Drive: Owens Corning's growth strategy heavily relies on strategic acquisitions, a key driver of its expansion. By focusing on bolt-on acquisitions, the company maximizes its commercial, operational, and geographic strengths while broadening its offerings.
A notable example is the planned acquisition of Masonite, announced on Feb 9, 2024. The acquisition is expected to be finalized in mid-2024, pending regulatory approvals. This acquisition represents a substantial investment of approximately $3.9 billion, including assumed debt. Simultaneously, Owens Corning initiated a strategic review of its glass reinforcements business.
These actions signify significant strides in reinforcing Owens Corning's position in building and construction materials while diversifying its portfolio of residential products. With the acquisition of Masonite, a prominent player in residential doors, Owens Corning is poised to enter a new market segment, further solidifying its presence and driving growth.
Strategic Initiatives: Owens Corning's strategic initiatives are propelling its growth trajectory across its business segments. In the Insulation business, geographic and product expansion through acquisitions, alongside the expansion of facilities like the Nephi, UT insulation facility, are bolstering performance. Focus on network optimization and manufacturing efficiency is driving profits, particularly in North American residential fiberglass, where automation and process technology investments are enhancing efficiency and reducing costs.
The company is also diversifying its insulation materials and systems for non-residential applications globally. During first-quarter 2024, positive pricing and a favorable mix in the Insulation business helped the company partially mitigate the decline in the Insulation segment’s net sales due to reduced volumes.
In the Composites division, Owens Corning is targeting higher-value markets like building, renewable energy, and infrastructure, expanding product platforms and investing in new lines such as structural composite lumber. By prioritizing key markets and optimizing manufacturing, it is enhancing competitiveness. Similarly, in Roofing, the company's efforts to expand its contractor network and innovate new products are boosting attachment rates, supported by capital investments in manufacturing facilities.
Overall, Owens Corning's strategic investments in growth and productivity are driving performance, positioning it to exceed its $10 billion revenue target by 2024.
Solid Roofing Business: The Roofing segment’s net sales rose 7% year over year to $957 million in the first quarter of 2024, driven by strong demand for premium laminate shingles and attachment of components products, as well as favorable mix and carryover price. However, this was offset mainly by volume impact from the segment’s exit of protective packaging. EBIT and EBITDA margins expanded 700 bps and 600 bps to 30% and 31%, respectively. The EBIT improvement was mainly backed by positive prices, favorable manufacturing costs and mix. For the second quarter of 2024, the company expects this segment’s revenues to be up by low to mid-single digits.
Attractive Valuation: Although OC has significantly outperformed the industry in the last year, its valuation looks favorable compared with its range as well as the industry average. The stock is currently trading at 11.2X forward 12-month earnings, which compares to 17.3X for the Zacks sub-industry and 17.7X for the Zacks sector. The company's solid Roofing business, new product innovation, and inorganic drive paint a more picture for investors.
Other Key Picks
M-tron Industries, Inc. (MPTI - Free Report) currently sports a Zacks Rank #1 (Strong Buy). It has topped earnings estimates in three of the trailing four quarters and missed once, with an average surprise of 26.7%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for MPTI’s 2024 sales and EPS indicates a rise of 10.3% and 58.6%, respectively, from the prior-year levels.
Howmet Aerospace Inc. (HWM - Free Report) presently carries a Zacks Rank #2. HWM has a trailing four-quarter earnings surprise of 8.5%, on average.
The Zacks Consensus Estimate for HWM’s 2024 sales and EPS indicates a rise of 10.6% and 29.9%, respectively, from the prior-year levels.
Gates Industrial Corporation plc (GTES - Free Report) presently carries a Zacks Rank #2. GTES has a trailing four-quarter earnings surprise of 14.9%, on average.
The Zacks Consensus Estimate for GTES’ 2024 sales indicates a 0.2% decline but EPS growth of 2.9% from the prior-year levels.
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Owens Corning (OC) Rises 65% in a Year: Will the Momentum Last?
Owens Corning (OC - Free Report) is capitalizing on strong demand for its Roofing business along with ongoing product innovation and effective pricing strategies. Additionally, OC is benefiting from reduced input and manufacturing costs, further bolstering its profitability. Moreover, strategic initiatives and targeted acquisitions are reinforcing its market position and contributing to its overall success.
Shares of this Toledo, OH-based building materials systems and composite solutions provider have rallied 64.6% over the past year, outperforming the Zacks Building Products – Miscellaneous industry’s 55.8% rise.
The Zacks Consensus Estimate has witnessed an uptrend over the past 30 days as analysts raised their estimates, depicting optimism about the stock’s growth potential. Over the said time frame, the Zacks Consensus Estimate for 2024 earnings per share (EPS) has increased to $15.37 from $13.77. The estimated figure indicates 6.6% year-over-year growth.
Image Source: Zacks Investment Research
The growth prospect of this current Zacks Rank #2 (Buy) company is further solidified with a VGM Score of A, backed by a Value, Growth and Momentum Score of A, B and B, respectively. The positive trend signifies bullish analysts’ sentiments and robust fundamentals in the near term.
What Makes the Stock Attractive
Product Innovation: Owens Corning is driving growth through relentless product innovation. In the first quarter of 2024, it launched 13 new or improved products, including the PINKWRAP weather-resistant barrier house wrap in its Roofing business. Leveraging its manufacturing prowess and strong industry relationships, Owens Corning anticipates significant growth in this category. In 2023, the company introduced 39 newer or refreshed products across the Roofing, Insulation, and Composite divisions, all aimed at enhancing performance and durability. Additionally, Owens Corning is expanding its product range to include multi-material systems for roofing, such as hip and ridge, starter, and ventilation products, enriching its offerings and boosting margins with high-margin items. This strategic focus on innovation underscores Owens Corning's commitment to meeting customer needs and driving market success.
Inorganic Drive: Owens Corning's growth strategy heavily relies on strategic acquisitions, a key driver of its expansion. By focusing on bolt-on acquisitions, the company maximizes its commercial, operational, and geographic strengths while broadening its offerings.
A notable example is the planned acquisition of Masonite, announced on Feb 9, 2024. The acquisition is expected to be finalized in mid-2024, pending regulatory approvals. This acquisition represents a substantial investment of approximately $3.9 billion, including assumed debt. Simultaneously, Owens Corning initiated a strategic review of its glass reinforcements business.
These actions signify significant strides in reinforcing Owens Corning's position in building and construction materials while diversifying its portfolio of residential products. With the acquisition of Masonite, a prominent player in residential doors, Owens Corning is poised to enter a new market segment, further solidifying its presence and driving growth.
Strategic Initiatives: Owens Corning's strategic initiatives are propelling its growth trajectory across its business segments. In the Insulation business, geographic and product expansion through acquisitions, alongside the expansion of facilities like the Nephi, UT insulation facility, are bolstering performance. Focus on network optimization and manufacturing efficiency is driving profits, particularly in North American residential fiberglass, where automation and process technology investments are enhancing efficiency and reducing costs.
The company is also diversifying its insulation materials and systems for non-residential applications globally. During first-quarter 2024, positive pricing and a favorable mix in the Insulation business helped the company partially mitigate the decline in the Insulation segment’s net sales due to reduced volumes.
In the Composites division, Owens Corning is targeting higher-value markets like building, renewable energy, and infrastructure, expanding product platforms and investing in new lines such as structural composite lumber. By prioritizing key markets and optimizing manufacturing, it is enhancing competitiveness. Similarly, in Roofing, the company's efforts to expand its contractor network and innovate new products are boosting attachment rates, supported by capital investments in manufacturing facilities.
Overall, Owens Corning's strategic investments in growth and productivity are driving performance, positioning it to exceed its $10 billion revenue target by 2024.
Solid Roofing Business: The Roofing segment’s net sales rose 7% year over year to $957 million in the first quarter of 2024, driven by strong demand for premium laminate shingles and attachment of components products, as well as favorable mix and carryover price. However, this was offset mainly by volume impact from the segment’s exit of protective packaging. EBIT and EBITDA margins expanded 700 bps and 600 bps to 30% and 31%, respectively. The EBIT improvement was mainly backed by positive prices, favorable manufacturing costs and mix. For the second quarter of 2024, the company expects this segment’s revenues to be up by low to mid-single digits.
Attractive Valuation: Although OC has significantly outperformed the industry in the last year, its valuation looks favorable compared with its range as well as the industry average. The stock is currently trading at 11.2X forward 12-month earnings, which compares to 17.3X for the Zacks sub-industry and 17.7X for the Zacks sector. The company's solid Roofing business, new product innovation, and inorganic drive paint a more picture for investors.
Other Key Picks
M-tron Industries, Inc. (MPTI - Free Report) currently sports a Zacks Rank #1 (Strong Buy). It has topped earnings estimates in three of the trailing four quarters and missed once, with an average surprise of 26.7%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for MPTI’s 2024 sales and EPS indicates a rise of 10.3% and 58.6%, respectively, from the prior-year levels.
Howmet Aerospace Inc. (HWM - Free Report) presently carries a Zacks Rank #2. HWM has a trailing four-quarter earnings surprise of 8.5%, on average.
The Zacks Consensus Estimate for HWM’s 2024 sales and EPS indicates a rise of 10.6% and 29.9%, respectively, from the prior-year levels.
Gates Industrial Corporation plc (GTES - Free Report) presently carries a Zacks Rank #2. GTES has a trailing four-quarter earnings surprise of 14.9%, on average.
The Zacks Consensus Estimate for GTES’ 2024 sales indicates a 0.2% decline but EPS growth of 2.9% from the prior-year levels.