Owens Corning OC reached a new 52-week high of $68.72 on Nov 27, 2019. The stock pulled back to end the trading session at $67.91, down 0.9%.
Notably, shares of Owens Corning have surged 54.4% year to date compared with the Zacks Building Products – Miscellaneous industry’s growth of 50%. Focus on strategic initiatives, acquisitions and strong price realization will likely drive the stock’s performance in the upcoming quarters as well. Importantly, the industry has portrayed a bull run in a year’s time, evident from the stock’s rally compared with the S&P 500 index’s rise of 24.5%. Notably, the industry ranks in the top 29% (74 out of 253) of the Zacks classified industries.
Let’s delve deeper to determine the factors behind its impressive run on the bourses.
What’s Driving the Stock?
Owens Corning, leading provider of building materials systems and composite solutions, has been benefitting from increased organic growth, improved operating efficiencies as well as higher contribution from Roofing and Composites businesses.
In October, the company reported better-than-expected third-quarter 2019 results, with earnings and sales beating the respective Zacks Consensus Estimate by 7.9% and 2.2%. The metrics also increased on a year-on-year basis by 3.8% and 3.6%, respectively. The upside was primarily backed by strong performance of the Roofing business and manufacturing productivity across the board.
The company has been implementing strategic initiatives that are expected to drive overall performance going forward. Segment-wise, in the Insulation business, its technical and other building insulation businesses are delivering solid results on the back of geographic and product expansion through acquisitions. Also, improved automation and higher investments in process technology to improve manufacturing efficiencies as well as reduce costs bodes well for its North American residential fiberglass business. Moreover, solid performance in the Composites and Roofing segments has been adding to the upside. In the Composite business, the company has been generating higher volumes backed by its efforts on higher value applications for glass non-wovens and specific markets like India. Notably, the company focuses on improving low-cost manufacturing position through strategic supply agreements, accomplished large-scale furnace investments and additional productivity. In the Roofing segment, Owens Corning is leveraging vertical integration, material science capabilities and commercial strength to design as well as market unique roofing shingles and components that attract contractors, homeowners as well as distributors.
Acquisitions are an important part of Owens Corning’s growth strategy. In February 2018, the company completed the acquisition of Paroc — a leading producer of mineral wool insulation for building and technical applications in Europe — for approximately $1,121 million. This deal has expanded its geographic scope in Europe. It enabled the company to augment portfolio in a bid to include insulation products in all three major markets — North America, Europe and China. In the first nine months of 2019, the Paroc acquisition added $38 million to total net sales.
Material and transportation inflation has been affecting the the Roofing and Insulation business, somewhat offset by solid pricing momentum. Owens Corning achieved strong price realization, which partially offset asphalt cost inflation that increased throughout the second quarter but was stable in the third quarter.
Courtesy of high investment in technology, the company plans to empower long-term growth prospects in the upcoming quarters.
Zacks Rank & Stocks to Consider
Currently, Owens Corning carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the same industry are Foundation Building Materials, Inc FBM, Gibraltar Industries, Inc ROCK and Installed Building Products, Inc IBP, each sporting a Zacks #1 Rank (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Foundation Building Materials surpassed estimates in all of the trailing four quarters, the average being 45.1%.
Gibraltar Industries current-year earnings are expected to rise 19.2%.
Installed Building Products has three-five year expected earnings per share growth rate of 16%.
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