Here's What to Expect From Owens Corning's (OC) Q3 Earnings
Owens Corning OC is scheduled to report third-quarter 2023 results on Oct 25 before the opening bell.
In the last reported quarter, the company’s earnings and net sales topped the Zacks Consensus Estimate by 27.9% and 1.8%, respectively. Moreover, earnings increased 9.6% but net sales dipped 1.5% year over year.
Notably, the company reported better-than-expected earnings in the trailing four quarters, the average surprise being 18.2%.
The Trend in Estimate Revision
The Zacks Consensus Estimate for Owens Corning’s third-quarter earnings per share remained unchanged at $3.78. The estimated figure indicates a 5.9% increase from the year-ago quarter’s reported figure of earnings of $3.57 per share.
Owens Corning Inc Price and EPS Surprise
Owens Corning Inc price-eps-surprise | Owens Corning Inc Quote
The consensus estimate for net sales is pegged at $2.52 billion, indicating a 0.3% decrease from the prior-year quarter’s figure.
Factors to Note
Owens Corning’s third-quarter net sales are likely to be hurt by dismal performances in its Insulation and Composites businesses. The downtrend is likely to have been driven by lower volumes and the discontinuation of the Russian operation. That said, the above-mentioned headwinds are expected to have been partially offset by positive price realization, and favorable product and customer mix, especially in Europe. Also, progress in US housing starts bodes well.
The company expects the net sales of the to-be-reported quarter to be similar to the prior year. On the other hand, our model predicts the net sales to inch down 0.5% to $2.52 billion year over year.
Meanwhile, OC expects to generate a high-teen EBIT margin, thanks to positive price realization and moderating input costs. This is likely to have ensured a positive price compared with costs for the to-be-reported quarter. We expect the GAAP EBIT margin to be 16.4% compared to 24.1% reported in the prior-year quarter.
Segment-wise, for the Insulation business (accounted for 35.3% of second-quarter net sales), OC expects the net sales to be down by low-single digits compared with the prior-year quarter, attributable to lower volumes (primarily in North America), the sale of the Russian operation, planned maintenance downtime and production investments. Considering this scenario, we expect the net sales of this segment to decline 1.7% to $948.2 million. Furthermore, the company expects to generate mid-teen EBIT margins for this segment.
For the Composites business (24.2% of sales), the company anticipates the net sales to be down by mid-single digits year over year because of a slight decline in volumes and the adverse impact of the Russian operation sale. Also, moderating inflation is expected to have resulted in negative pricing and cost related to balancing production with anticipated demand is likely to accompany the downtrend. Our model expects the net sales for this segment to decline 5.1% to $605.7 million. Also, the company expects the EBIT margins to be on par sequentially for this segment.
Nevertheless, the positive performance expectation of OC from the Roofing business (43.8% of sales) is likely to have partially offset the tepid performance expectations from the other two segments. It expects the net sales for this segment to be up mid-single digits year over year, attributable to the increase in demand for industry shipments in the U.S. shingle end-market, accompanied by positive price and input cost deflation. We anticipate the net sales for this segment to increase 5.4% year over year to $1.06 billion.
What the Zacks Model Unveils
Our proven model conclusively predicts an earnings beat for Owens Corning this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is the case here.
Currently, OC has an Earnings ESP of +1.56% and a Zacks Rank of 3. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.
Other Stocks Poised to Beat on Earnings
Here are some other companies in the Zacks Construction sector, which according to our model, also have the right combination of elements to post an earnings beat in the quarter to be reported.
KBR, Inc. KBR has an Earnings ESP of +6.36% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
KBR’s earnings for the to-be-reported quarter are expected to increase 12.3%. Notably, the company reported better-than-expected earnings in the trailing four quarters, the average surprise being 10.8%.
Louisiana-Pacific Corporation LPX has an Earnings ESP of +2.07% and a Zacks Rank of 3.
LPX is expected to register a 19.2% decline in earnings for the to-be-reported quarter. The company reported better-than-expected earnings in three of the trailing four quarters and missed on the remaining occasion, the average surprise being 95.8%.
Vulcan Materials Company VMC has an Earnings ESP of +0.48% and a Zacks Rank of 2.
VMC’s earnings for the to-be-reported quarter are expected to increase 24.7%. The company reported better-than-expected earnings in three of the trailing four quarters and missed on the other one occasion, the average surprise being 14%.
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