Owens Corning (OC) Outperforms Q4 Earnings and Net Sales, Yet Faces Stock Decline

Published On: February 15, 2024 1:36 pm

Owens Corning This February, OC unveiled robust results for the final quarter of 2023, exceeding the Zacks Consensus Estimate for both earnings and net sales, setting the stage for investors. However, despite these successes, the announcement triggered a significant 2.7% plunge in Owens Corning’s shares on February 14th.

Chair and chief executive officer of OC, Brian Chambers, expressed optimism, stating, “Looking ahead, we will continue to focus on delivering outstanding results in the near-term as we execute the strategic moves announced last week which will further strengthen our leadership in building and construction materials and position the company for long-term success.”

Owens Corning updated the long-term EBIT margin expectation for its Roofing segment to a mid-20% on average, marking an encouraging shift from approximately 20%.

Highlights of Performance Metrics

The company achieved adjusted earnings per share (EPS) of $3.21, which outperformed the consensus mark of $2.82 by 13.8% and scaled up by 29% from the prior year’s $2.49.

Owens Corning Inc Price, Consensus and EPS Surprise

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

Net sales of $2.3 billion triumphed over the consensus mark of $2.24 billion by 3%, marking a 1% increase year over year from $2.29 billion.

Breakdown of Business Segments

The Composites segment experienced a 13% year-over-year drop in net sales to $514 million, attributed to decreased volumes and price declines stemming from low spot prices in glass reinforcements. Earnings before interest and taxes (EBIT) margin shrunk to 5% from 11% in the prior year, while the EBITDA margins also declined from 18% reported a year ago to 13%.

The Insulation segment witnessed $931 million in net sales, a 3% year-over-year decrease due to lower volumes in both the North American residential insulation and technical and global insulation businesses. The Roofing segment recorded a 16% year-over-year increase in net sales to $928 million, driven by strong demand.

Operating and Financial Highlights

Adjusted EBIT and adjusted EBITDA improved 18% and 13%, respectively, on a year-over-year basis. Adjusted EBIT and adjusted EBITDA margins expanded 200 basis points each from the prior year.

2023 and Balance Sheet Overview

In 2023, adjusted EPS totaled $14.42, a 12% increase from 2022, while net sales decreased by 1% to $9.68 billion. Owens Corning also reported an increase of 2% in both adjusted EBIT and adjusted EBITDA. As of December 31, 2023, the company had cash and cash equivalents of $1.62 billion, reflecting an improvement from the prior year.

Owens Corning released $812 million to shareholders through dividends and share repurchases in 2023, underlining the company’s commitment to rewarding its investors.

Strategic Outlook and Projections

The company expects net sales slightly below the first quarter of 2023 for the first quarter of 2024, while aiming to achieve mid-teens margins. Looking further ahead to 2024, Owens Corning anticipates general corporate expenses between $240 million and $250 million and interest expenses in the range of $70 million to $80 million.

Capital additions, depreciation, and amortization are estimated at approximately $550 million, with an effective tax rate projected to be between 24% and 26% on adjusted earnings.

Market Analytics and Comparable Performances

Owens Corning currently holds a Zacks Rank #3 (Hold). Other companies in the construction domain such as Watsco, Inc. (WSO) and Masco Corporation (MAS) have shown divergent performances, serving as markers for peers in the industry.

AECOM Q1 Earnings Beat Expectations, Design Business Backlog Grows

In the first quarter of fiscal 2024, AECOM (ACM) exceeded the Zacks Consensus Estimate for earnings. The company experienced a year-over-year increase in both top and bottom lines, driven by substantial organic net service revenues (NSR) growth in its design business. This impressive performance reinforces AECOM’s position as a formidable player in the market.

Promising Fiscal Projections

AECOM remains optimistic about its future performance, anticipating an organic NSR growth of 8-10% in fiscal 2024. Moreover, the company expects its adjusted EPS to range between $4.35 and $4.55, indicating a remarkable 20% improvement from the levels of fiscal 2023 on a constant-currency basis, based on the mid-point of the guidance.

Stellar Endorsements from Zacks

Zacks, a renowned investment research firm, has bestowed AECOM with a glowing endorsement. The firm has identified AECOM as the “Single Best Pick to Double” out of thousands of stocks. Additionally, Zacks’ Director of Research Sheraz Mian underscores the exceptional upside potential inherent in AECOM’s stock, likening it to a “watershed medical breakthrough.” This accolade serves as a powerful testament to AECOM’s robust growth prospects and resilience within its industry.

Furthermore, Zacks compares AECOM’s potential to exceed or equal the impressive surges of recent stocks such as Boston Beer Company, which skyrocketed by 143.0% in slightly over 9 months, and NVIDIA, which experienced a remarkable 175.9% surge in the span of a year. The favorable industry comparisons announced by Zacks further validate AECOM’s prowess and growth trajectory.

Final Thoughts

As the fiscal year progresses, AECOM’s strategic positioning, robust financial growth, and optimistic projections credibly strengthen the company’s foothold. The endorsements and projections clearly herald significant potential for investors seeking promising opportunities in the design and infrastructure sectors.

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