Factors Supporting Owens Corning's (OC) 49% Growth in a Year
Owens Corning (OC) is riding on strategic initiatives and the Insulation business despite inflationary headwinds.
Owens Corning OC has been benefiting from market-leading building materials businesses, strategic initiatives like product innovation and acquisitions as well as investments in process technology. Also, it has been witnessing strong volumes, broad price realization and high manufacturing efficiencies across businesses.
Shares of this Zacks Rank #2 (Buy) company have gained more than 49% in the past year, outperforming the Zacks Building Products - Miscellaneous industry’s 37.2% rally. The uptrend can be attributable to the above-mentioned tailwinds and a strong surprise history, having topped analysts’ expectation in the trailing nine quarters.
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Let’s delve deeper into factors that are influencing its overall performance.
Strategies to Drive Performance
Owens Corning has implemented strategic initiatives to drive overall performance. Segment-wise, in the Insulation unit, technical and other building insulation businesses look strong on the back of geographic and product expansion through acquisitions. In the North American residential fiberglass business, the company is utilizing automation and additional investments in process technology to improve manufacturing efficiencies as well as reduce costs.
The Composites segment has been generating higher volumes backed by its efforts toward higher value applications for glass non-wovens and specific markets like India. It focuses on improving low-cost manufacturing position through strategic supply agreements, accomplished large-scale furnace investments and additional productivity.
In the Roofing segment, Owens Corning is leveraging vertical integration, material science capabilities, and commercial strength to design and market unique roofing shingles as well as components that attract contractors, homeowners, and distributors.
On Jul 13, it announced the acquisition of vliepa GmbH. The acquisition broadened Owens Corning’s global nonwovens portfolio. All these initiatives are expected to aid the company to gain further.
Impressive Insulation Business, Housing & R&R Market
Owens Corning’s business experiences strong demand for insulating products. This is primarily driven by commercial and industrial construction activity, new residential construction, remodeling and repair activities as well as increased energy efficiency. For second-quarter 2021, the company witnessed increased volumes across the business. Especially in the technical and other insulation unit, demand was solid for its highly specified products backed by strong North America and Europe markets along with FOAMGLAS and mineral wool.
The U.S. housing industry has been booming despite headwinds like low inventory levels, inflationary pressure, and broad-based economic as well as public health risks associated with the new variants of the pandemic. Solid housing demand has been a boon for Owens Corning and companies like Masco MAS, TopBuild BLD, Construction Partners ROAD and others in the same industry. Also, the industry stands to benefit from increased repair and remodeling activity as people are indulging more in do-it-yourself and professional activity. Greater-than-expected demand for home improvement products has also been benefiting the company.
Robust Outlook & Prospects
Backed by strong first-half results and impressive macroeconomic indicators for the residential housing industry, the company has provided a strong view for 2021. It expects the U.S. residential housing market to remain robust, and commercial and industrial markets to strengthen.
For the North American residential fiberglass insulation business, the company expects volume to be up 10% for the third quarter from last-year levels, given additional price realization. In the technical and other building insulation businesses, volumes are expected to rise 10% for the third quarter from the year-ago reading, with increasing demand for its products in global building and construction applications. Composites revenues are likely to improve year over year on improvement in sales mix and additional price realization, given strong commercial work. Roofing market is likely to be relatively flat in the third quarter from the prior year.
The Zacks Consensus Estimate for third-quarter earnings is currently pegged at $2.52 per share, indicating a 48.2% increase from the year-ago period. The same for revenues is pegged at $2.17 billion, suggesting a 14% increase from a year ago.
The consensus mark for 2021 earnings is currently pegged at $8.79 per share, indicating a 68.1% increase from the year-ago figure. The same for revenues is pegged at $8.29 billion, suggesting a 17.5% increase from a year ago.
The company’s solid VGM Score of A — driven by a Value and Growth Score of A — and Momentum Score of B are also justifying its prospects.
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