Owens Misses on Q3 Earnings, Revs
Global producer of glass fiber reinforcements, Owens Corning’s (OC), third-quarter earnings of 53 cents shot up 51.4% compared to 34 cents reported a year ago backed by higher margins in the Roofing segment. Earnings lagged the Zacks Consensus Estimate of 64 cents by 17.2% on the back of weaker-than-expected revenues.
Revenues and Margins
Net sales went up 3.1% to $1.32 billion compared to $1.28 billion a year ago on the back of strong sales in the Insulation segment. Revenues, however, lagged the Zacks Consensus Estimate of $1.37 billion due to lower than expected volumes.
Gross profit increased 25.2% to $253 million backed by lower cost of sales. Earnings Before Interest and Tax (:EBIT) shot up 46.9% to $119 million backed by higher EBIT in most of the segments.
Segment Performance
Composites: Net sales dipped 1% year over year to $453 million, due to unfavorable foreign exchange. Volumes were down slightly due to weakness in demand for roofing in North America.
Building Material: Net sales went up 5% year over year to $902 million backed by improved pricing and the acquisition of Thermafiber which boosted sales in the Insulation materials. Volume was up in mid-teens backed by strong volume growth in Western and Atlantic Coast states.
Other Financial Update
During the third quarter, Owens repurchased 1.4 million shares of common stock for a total of $54 million.
During the quarter, Owens Corning acquired the mineral wool commercial and industrial insulation products manufacturer, Thermafiber Inc. The acquisition includes a 145,000 square foot manufacturing unit located in Wabash, Indiana. The buyout provides Owens Corning with a broad insulation portfolio of fiberglass, foam and mineral wool insulation products.
Outlook
For fiscal 2013, Owens expects EBIT to go up by $100 million. It expectsRoofing industry shipments to be down by mid-single digits due to lower storm activity. Insulation sales is expected to continue on its growth trajectory in the U.S. backed by new residential construction, improved capacity utilization and positive pricing.
The Composites segment is expected to remain flat year over year in fiscal 2013. Owens expects a higher tax rate in fiscal 2013 and a corporate expense of $105 million, lower than the previous year, due to reduction of variable incentive compensation.
Other Stocks to Consider
Owens currently carries a Zacks Rank #4 (Sell).Other stocks doing well in the construction sector are KB Home (KBH), M/I Homes Inc. (MHO) and Masco Corp. (MAS). All the stocks carry a Zacks Rank #2 (Buy).
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