Yahoo Finance Here's Why You Should Invest in Owens Corning (OC) Stock Now
Owens Corning’s OC focus on improving manufacturing efficiencies, ongoing product innovation, effective pricing strategies as well as reducing costs has been driving growth. Also, its focus on higher-value applications centering around building, construction, renewable energy and infrastructure markets bodes well. Moreover, 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 gained 16.8% so far this year while the Zacks Building Products – Miscellaneous industry has managed to gain only 4.1%.
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The Zacks Consensus Estimate has witnessed an uptrend over the past 60 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 $15.48 from $15.20. The estimated figure indicates 7.4% year-over-year growth.
The growth prospect of this current Zacks Rank #1 (Strong Buy) company is further solidified with a VGM Score of B. The positive trend signifies bullish analysts’ sentiments and robust fundamentals in the near term.
What Makes the Stock Attractive
Focus on Boosting Manufacturing Performance: Through strategic efforts, the company’s focus on network optimization and manufacturing performance is boosting profits. In the North American residential fiberglass business, OC is utilizing automation and additional investments in process technology to improve manufacturing efficiencies, as well as reduce costs. Additionally, the company continues to invest in new insulation materials and systems in non-residential applications to expand its global product offerings.
In the Composites segment, the company is transitioning to higher-value applications targeting the building, construction, renewable energy, and infrastructure markets. This shift includes enhancing key product platforms, such as non-wovens, and developing new product lines like structural composite lumber and decking. The company's strategy has two main focuses. First, it targets key markets and regions where it holds a leading position, such as North America, Europe, and India. Second, it aims to make its Composite business the most cost-effective network, emphasizing productivity and manufacturing performance. To achieve a low-cost manufacturing position, the company leverages strategic supply agreements, invests in large-scale furnaces, and boosts productivity.
In the Roofing segment, the company is expanding its contractor network, innovating new products, and increasing shingle capacity to enhance roofing component attachment rates. Recent capital investments have boosted capacity at several manufacturing facilities over the past two years.
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.
Favorable Pricing: Owens Corning continues to benefit from its positive pricing initiatives. 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. A weaker macroenvironment in Europe and partial softness in North America impacted the volumes. Adjusted EBITDA margin expanded 400 basis points (bps) to 25% from the year-ago figure. The company expects long-term EBIT margins for the Insulation and Composites segments to be in the mid-teens on average.
Portfolio Re-Shaping: Owens Corning's growth strategy relies on strategic acquisitions to enhance its market position and expand its offerings. A key move is the acquisition of Masonite. This acquisition diversifies Owens Corning's portfolio by adding residential doors to its product lineup. Concurrently, a strategic review of its glass reinforcements business is underway. These actions underscore Owens Corning's commitment to reshaping and growing the company.
Attractive Valuation: Although OC has outpaced the industry so far this year, shares of OC look attractive with respect to its valuation metrics. The stock is currently trading at 10.5X forward 12-month earnings, which compares with 15.7X for the Zacks sub-industry and 16.3X for the Zacks sector. The company's strategic initiatives are set to boost its operating efficiencies, along with new product innovation and inorganic drives to paint a rosy picture for investors. The stock presents a potentially attractive valuation for investors seeking exposure to the building product industry.
Again, Owens Corning's trailing 12-month return on equity of 26.5% is better than its peer group average of 13.8%.
Other Key Picks
Here are some other top-ranked stocks from the Construction sector.
Armstrong World Industries, Inc. AWI presently sports a Zacks Rank of 1. AWI delivered a trailing four-quarter earnings surprise of 15.2%, on average. The stock has gained 14% year to date (YTD).
The Zacks Consensus Estimate for AWI’s 2024 sales and EPS indicates improvements of 9.3% and 10.7%, respectively, from a year ago.
Advanced Drainage Systems WMS currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
WMS delivered a trailing four-quarter earnings surprise of 30.5%, on average. The stock has risen 13.9% YTD. The Zacks Consensus Estimate for WMS’ 2024 sales and EPS indicates growth of 5.1% and 12.2%, respectively, from the prior-year reported levels.
PulteGroup, Inc. PHM currently carries a Zacks Rank of 2 (Buy). It has a trailing four-quarter earnings surprise of 12.5%, on average. PHM shares have gained 6.6% YTD.
The consensus estimate for PHM’s 2024 sales and EPS implies increases of 7.9% and 10%, respectively, from the prior-year reported levels.
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PulteGroup, Inc. (PHM) : Free Stock Analysis Report
Advanced Drainage Systems, Inc. (WMS) : Free Stock Analysis Report
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Owens Corning Inc (OC) : Free Stock Analysis Report
