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Owens Corning Stock Declines in the Past 3 Months: Things to Note
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Owens Corning (OC - Free Report) stock has lost 7.1% in the past three months against the Zacks Building Products - Miscellaneous industry’s 9.5% growth. Despite witnessing healthy North American building and construction end-market demand, the company’s volumes have declined of late.
Apart from this, OC has been witnessing significant inflationary pressure and labor woes. Also, foreign currency translation remains a concern for this residential and commercial building products company. Owing to these headwinds, the company outlined tepid views for volume in the third quarter.
OC has seen a downward estimate revision for third-quarter 2024 earnings over the past 30 days to $4.01 per share from $4.17. The estimated figure indicates a 3.4% year-over-year decline from the previous year.
Image Source: Zacks Investment Research
Let’s delve deeper into the factors impacting this Zacks Rank #4 (Sell) company.
Lackluster Volume in Q3: For the third quarter, Owens Corning expects Roofing revenues to be flat to down slightly year over year. Industry shipments for U.S. shingle end-market demand are likely to be down by mid-to-high single digits, with the company’s shingle volumes expected to remain relatively flat. Also, volume is likely to be hit by distribution inventory levels and the exit of protective packaging.
The company expects more discretionary repair and remodeling activity to remain softer in the near term, primarily impacting demand for Doors products. Outside North America, the company anticipates macroeconomic trends and geopolitical tensions will continue to result in volume pressure. For Doors, it expects the top-line performance to be down by high-single digits from a run rate adjusted in the second quarter, driven by continued market pressure.
In Composites, the company anticipates overall revenues to be down by low to mid-single digits. It also expects overall pricing to step down year over year, similar to what it saw through the first half, with both contract pricing and spot pricing lower than last year.
High Inflation & Other Costs: OC has been witnessing intense inflationary pressure over the last few quarters. Owens Corning is incurring high expenses related to ongoing cost optimization and product line rationalization actions. In the first half of 2024, total restructuring, acquisition and divestiture-related costs were $129 million against gains of $124 million in the year-ago quarter. The increase in the costs was primarily driven by transaction costs related to the announced acquisition of Masonite.
Ongoing inflationary pressures throughout the organization have been dampening Owens Corning’s performance. For the third quarter, the company expects input materials to witness inflationary pressure across the businesses. Costs are expected to evaluate manufacturing investments in U.S. fiberglass in the insulation business. This apart, labor constraint remains a concerning factor.
Currency Woes & Macro-Economic Headwinds: OC is exposed to risks from unfavorable movements in foreign currencies due to its operations in Europe and Asia-Pacific. Also, it is highly dependent on housing market demand. Given the cyclical nature of the housing industry and its sensitivity to changes in consumer confidence and economic conditions, Owens Corning's operations may also be impacted.
Key Picks
Some better-ranked stocks in the same industry are Frontdoor, Inc. (FTDR - Free Report) , Latham Group, Inc. (SWIM - Free Report) and Armstrong World Industries, Inc. (AWI - Free Report) .
Frontdoor: Based in Memphis, TN, this company provides home warranties in the United States. The company is benefiting from its focus on new and innovative ways to boost demand for services, and the relaunch of the American Home Shield brand is a significant component of this strategy. Looking ahead, the company is committed to establishing a solid foundation by investing in its brand and technology infrastructure and enhancing productivity throughout the organization.
FTDR flaunts a Zacks Rank #1 (Strong Buy). FTDR has seen an upward estimate revision of 8.3% for 2024 earnings over the past 30 days to $2.73 per share. The estimated figure indicates 18.7% year-over-year growth for 2024. You can see the complete list of today’s Zacks #1 Rank stocks here.
Latham Group: Based in Latham, NY, the company stands as the leading designer, manufacturer, and marketer of in-ground residential swimming pools and pool accessories across North America, Australia, and New Zealand. Despite difficult industry conditions, the company has been gaining from improved cost structures, production efficiencies, lean manufacturing, value engineering programs, and lower raw material costs. It remains focused on fiberglass pools, which offer cost, installation, and eco-friendly advantages over concrete pools.
The company has been expanding its product line and national dealer network, driving awareness and adoption. Meanwhile, the latest acquisition of Coverstar Central, Latham's long-time partner in automatic safety covers, is expected to enhance margins, accelerate sales growth, and strengthen relationships with pool builders, particularly for promoting fiberglass pools.
SWIM presently sports a Zacks Rank #1. This company surpassed earnings estimates in the last reported quarter by 275%. SWIM has seen an upward estimate revision of 2024 earnings to 13 cents from break-even over the past 30 days.
Armstrong World Industries: Based in Lancaster, PA, Armstrong World is a leading global manufacturer of ceiling systems primarily for commercial, institutional, and residential building construction and renovation. The company has been thriving by focusing on innovative products and pursuing strategic acquisitions to diversify its portfolio. Its recent acquisition of 3form, LLC is set to bolster the Architectural Specialties segment and strengthen connections with architects and designers.
Additionally, Armstrong World has been investing in digitalization and technological advancements. Since 2022, its digital initiative, Canopy, has shown consistent quarterly growth, generating new demand for its products. Furthermore, the company's recent investments in developing new products in metal, wood, and Tectum materials are contributing positively to its performance.
AWI presently carries a Zacks Rank #2 (Buy). AWI has seen an upward estimate revision of 3.1% for 2024 earnings over the past 30 days to $6.07 per share. The company’s earnings for 2024 are expected to increase 14.1%.
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Owens Corning Stock Declines in the Past 3 Months: Things to Note
Owens Corning (OC - Free Report) stock has lost 7.1% in the past three months against the Zacks Building Products - Miscellaneous industry’s 9.5% growth. Despite witnessing healthy North American building and construction end-market demand, the company’s volumes have declined of late.
Apart from this, OC has been witnessing significant inflationary pressure and labor woes. Also, foreign currency translation remains a concern for this residential and commercial building products company. Owing to these headwinds, the company outlined tepid views for volume in the third quarter.
OC has seen a downward estimate revision for third-quarter 2024 earnings over the past 30 days to $4.01 per share from $4.17. The estimated figure indicates a 3.4% year-over-year decline from the previous year.
Image Source: Zacks Investment Research
Let’s delve deeper into the factors impacting this Zacks Rank #4 (Sell) company.
Factors Concerning Owens Corning’s Stock Performance
Lackluster Volume in Q3: For the third quarter, Owens Corning expects Roofing revenues to be flat to down slightly year over year. Industry shipments for U.S. shingle end-market demand are likely to be down by mid-to-high single digits, with the company’s shingle volumes expected to remain relatively flat. Also, volume is likely to be hit by distribution inventory levels and the exit of protective packaging.
The company expects more discretionary repair and remodeling activity to remain softer in the near term, primarily impacting demand for Doors products. Outside North America, the company anticipates macroeconomic trends and geopolitical tensions will continue to result in volume pressure. For Doors, it expects the top-line performance to be down by high-single digits from a run rate adjusted in the second quarter, driven by continued market pressure.
In Composites, the company anticipates overall revenues to be down by low to mid-single digits. It also expects overall pricing to step down year over year, similar to what it saw through the first half, with both contract pricing and spot pricing lower than last year.
High Inflation & Other Costs: OC has been witnessing intense inflationary pressure over the last few quarters. Owens Corning is incurring high expenses related to ongoing cost optimization and product line rationalization actions. In the first half of 2024, total restructuring, acquisition and divestiture-related costs were $129 million against gains of $124 million in the year-ago quarter. The increase in the costs was primarily driven by transaction costs related to the announced acquisition of Masonite.
Ongoing inflationary pressures throughout the organization have been dampening Owens Corning’s performance. For the third quarter, the company expects input materials to witness inflationary pressure across the businesses. Costs are expected to evaluate manufacturing investments in U.S. fiberglass in the insulation business. This apart, labor constraint remains a concerning factor.
Currency Woes & Macro-Economic Headwinds: OC is exposed to risks from unfavorable movements in foreign currencies due to its operations in Europe and Asia-Pacific. Also, it is highly dependent on housing market demand. Given the cyclical nature of the housing industry and its sensitivity to changes in consumer confidence and economic conditions, Owens Corning's operations may also be impacted.
Key Picks
Some better-ranked stocks in the same industry are Frontdoor, Inc. (FTDR - Free Report) , Latham Group, Inc. (SWIM - Free Report) and Armstrong World Industries, Inc. (AWI - Free Report) .
Frontdoor: Based in Memphis, TN, this company provides home warranties in the United States. The company is benefiting from its focus on new and innovative ways to boost demand for services, and the relaunch of the American Home Shield brand is a significant component of this strategy. Looking ahead, the company is committed to establishing a solid foundation by investing in its brand and technology infrastructure and enhancing productivity throughout the organization.
FTDR flaunts a Zacks Rank #1 (Strong Buy). FTDR has seen an upward estimate revision of 8.3% for 2024 earnings over the past 30 days to $2.73 per share. The estimated figure indicates 18.7% year-over-year growth for 2024. You can see the complete list of today’s Zacks #1 Rank stocks here.
Latham Group: Based in Latham, NY, the company stands as the leading designer, manufacturer, and marketer of in-ground residential swimming pools and pool accessories across North America, Australia, and New Zealand. Despite difficult industry conditions, the company has been gaining from improved cost structures, production efficiencies, lean manufacturing, value engineering programs, and lower raw material costs. It remains focused on fiberglass pools, which offer cost, installation, and eco-friendly advantages over concrete pools.
The company has been expanding its product line and national dealer network, driving awareness and adoption. Meanwhile, the latest acquisition of Coverstar Central, Latham's long-time partner in automatic safety covers, is expected to enhance margins, accelerate sales growth, and strengthen relationships with pool builders, particularly for promoting fiberglass pools.
SWIM presently sports a Zacks Rank #1. This company surpassed earnings estimates in the last reported quarter by 275%. SWIM has seen an upward estimate revision of 2024 earnings to 13 cents from break-even over the past 30 days.
Armstrong World Industries: Based in Lancaster, PA, Armstrong World is a leading global manufacturer of ceiling systems primarily for commercial, institutional, and residential building construction and renovation. The company has been thriving by focusing on innovative products and pursuing strategic acquisitions to diversify its portfolio. Its recent acquisition of 3form, LLC is set to bolster the Architectural Specialties segment and strengthen connections with architects and designers.
Additionally, Armstrong World has been investing in digitalization and technological advancements. Since 2022, its digital initiative, Canopy, has shown consistent quarterly growth, generating new demand for its products. Furthermore, the company's recent investments in developing new products in metal, wood, and Tectum materials are contributing positively to its performance.
AWI presently carries a Zacks Rank #2 (Buy). AWI has seen an upward estimate revision of 3.1% for 2024 earnings over the past 30 days to $6.07 per share. The company’s earnings for 2024 are expected to increase 14.1%.