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Owens Corning (OC) to Post Q3 Earnings: What's in Store?

Owens Corning (OC) is benefitting from robust demand for residential repair and remodeling activity and insulating products. However, rising material and transportation costs are concerns.

This story originally appeared on Zacks

Owens Corning OC is scheduled to report third-quarter 2021 results on Oct 27, before market open.

In the last reported quarter, the company’s sales and earnings beat the Zacks Consensus Estimate by 13.5% and 23.8%, increasing 37.8% and 186% on a year-over-year basis, respectively. Markedly, the company beat earnings expectations in the last four quarters, the average being 27.8%. The upside was driven by a robust U.S. residential housing market, and stronger commercial and industrial markets.

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Trend in Estimate Revision

The Zacks Consensus Estimate for earnings per share has moved 1.6% down to $2.51 over the past seven days for the quarter to be reported. Nevertheless, the estimated figure indicates an increase of 47.7% from $1.70 per share reported in the year-ago quarter. The consensus mark for revenues is pegged at $2.15 billion, suggesting 13% growth from the year-ago reported figure of $1.90 billion.

Factors to Consider

The company’s earnings and revenues for third-quarter 2021 are expected to have improved year over year, backed by robust demand coupled with operational efficiencies and exceptional capabilities of the global team. The company’s revenues will likely be benefited from the escalated demand for residential repair and remodeling activity, U. S. housing starts and global industrial production. Also, a consistent commercial market bodes well.

For the third quarter, Owens Corning’s insulation business is expected to have witnessed solid growth due to strong demand for insulating products. Especially in the technical and other insulation unit, the company has been experiencing higher demand for its highly-specified products, backed by strong North America and Europe markets. These factors are likely to have supported growth of the Insulation business segment for third-quarter 2021. The Zacks Consensus Estimate for the company’s Insulation segment revenues is $801 million, suggesting a 17.6% increase from the year-ago figure.

The company is witnessing higher volumes backed by its efforts on higher value applications for glass non-woven and specific markets in the Composite business. The company’s focus on key markets like North America, Europe and India coupled with its efforts of making the Composite business the most cost-effective network with respect to productivity and manufacturing performance is expected to drive growth in the quarter to be reported. The consensus mark for the Composites segment revenues is pegged at $581 million, implying an 11.5% year-over-year growth.

Furthermore, for the Roofing business, pricing is likely to improve during the quarter, given the previously-announced price increases. Inflation in asphalt and other material inputs is likely to be more significant for the quarter to be reported. However, to combat this inflation, the company increased 5-7% price. The company expects Roofing EBIT to rise 25% as price/cost mix remains positive. The Zacks Consensus Estimate for Roofing segment revenues is pegged at $834 million, indicating a year-over-year rise of 9.6%.

However, the company is facing some inflationary headwinds with respect to transportation, material and energy costs. These factors are likely to have hampered Owens Corning’s operating performance in third-quarter 2021.

Owens Corning Inc Price and EPS Surprise

Owens Corning Inc Price and EPS Surprise

Owens Corning Inc price-eps-surprise | Owens Corning Inc Quote

What Our Model Indicates

Our proven model does not conclusively predict an earnings beat for Owens Corning this time around. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here, as you will see below.

Earnings ESP: Earnings ESP for Owens Corning is -6.07%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently has a Zacks Rank #4 (Sell).

Stocks With Favorable Combination

Here are some companies in the Zacks Construction sector, which according to our model, have the right combination of elements to post an earnings beat in the quarters to be reported.

KBR, Inc. KBR has an Earnings ESP of +2.66% and carries a Zacks Rank #2.

Aspen Aerogels, Inc. ASPN has an Earnings ESP of +5.62% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Installed Building Products, Inc. IBP has an Earnings ESP of +0.60% and a Zacks Rank #3.

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