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Owens Corning (OC) to Post Q3 Earnings: What's in the Cards?

Zacks Equity Research

Owens Corning OC is slated to report third-quarter 2019 results on Oct 23, before the opening bell.

In the last reported quarter, the company’s earnings and net sales not only topped the respective Zacks Consensus Estimate by 15.9% and 5.1%, but also improved 11% and 5.2% on a year-over-year basis, courtesy of increased organic growth, improved operating efficiencies and higher contribution from the Roofing business.

Notably, Owens Corning’s earnings surpassed the consensus mark in two of the trailing four quarters, with the average positive surprise being 2.4%.

How are Estimates Faring?

Let’s take a look at the estimate revision trend in order to get a clear picture of what analysts are thinking about the company prior to the earnings release.

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has increased to $1.51 from $1.50 per share over the past 30 days. However, this indicates a decrease of 2% from the year-ago reported figure of $1.54 per share. Revenues are expected to be $1.85 billion, suggesting a 1.5% year-over-year decline.

 

Owens Corning Inc Price and EPS Surprise

 

Owens Corning Inc Price and EPS Surprise

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

Factors to Consider

Owens Corning’s third-quarter revenues are expected to have benefited from strong contribution from the Roofing segment (accounting for 40.6% of revenues), backed by increased storm activity. Also, the Insulation business is expected to have regained market share in the quarter and aided its top line.

Acquisitions — which play an important role in Owens Corning’s growth strategy — and strong price realization are expected to have boosted its performance in the third quarter, partially offsetting asphalt cost inflation. Although material and transportation inflation is expected to get reflected in the company’s margins, particularly for the Roofing and Insulation business, solid pricing momentum is likely to have offset the negatives.

The Zacks Consensus Estimate for Roofing segment revenues is pegged at $711 million, indicating a year-over-year rise of 10% but a sequential decrease of 8.6%. Meanwhile, the company’s Insulation segment (accounting for 34.5% of revenues) revenues are estimated to reach $710 million, suggesting flat year-over-year growth but a 7.4% sequential rise. Moreover, the consensus mark for the Composites segment (accounting for 27.9% of revenues) revenues is pegged at $504 million, implying 0.8% year-over-year decline and 5.8% sequential fall.

Overall, strategic acquisitions, impressive pricing momentum, strong organic growth, operating efficiencies and solid Roofing business are expected to have positively affected the company’s third-quarter performance. Also, solid commercial execution, strong manufacturing gains and disciplined cost control are likely to be reflected in its results. However, increased raw material and transportation costs, adverse geographic mix, negative impact of foreign currency translation, along with lower shingle volumes are expected to have hampered the bottom line.

What Our Model Indicates

Our proven model does not predict that Owens Corning is likely to beat estimates in the quarter to be reported. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to deliver a positive surprise. This is not the case here, as you will see below.

Earnings ESP: Owens Corning has an Earnings ESP of -1.33%. This is because the Most Accurate Estimate of $1.49 is lower than the Zacks Consensus Estimate of $1.51. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Owens Corning currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks Worth a Look

Here are some companies in the Zacks Construction sector, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported.

Meritage Corporation MTH has an Earnings ESP of +0.45% and a Zacks Rank #1.

Jacobs Engineering Group Inc. JEC has an Earnings ESP of +2.20% and holds a Zacks Rank #2.

Martin Marietta Materials, Inc. MLM has an Earnings ESP of +1.77% and carries a Zacks Rank #2.

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