Owens Corning (OC) Up 7.1% Since Last Earnings Report: Can It Continue?

Core Viewpoint - Owens Corning reported strong first-quarter 2024 earnings, with adjusted earnings per share (EPS) and net sales exceeding expectations, despite a decline in sales volumes in certain segments [2][3]. Financial Performance - Adjusted EPS was $3.59, surpassing the consensus estimate of $3.04 by 18.1% and increasing 28% from $2.80 a year ago [3]. - Net sales reached $2.3 billion, beating the consensus mark of $2.26 billion by 1.8%, but fell 1% year over year from $2.33 billion [3]. Segment Performance - Composites Segment: Net sales decreased 11% year over year to $523 million due to lower volumes and price declines, but EBIT margin improved to 9% from 8% [4]. - Insulation Segment: Net sales were $904 million, down 2% year over year, with stable demand in North America but challenges in Europe; EBIT margin rose 100 basis points to 18% [5]. - Roofing Segment: Net sales increased 7% year over year to $957 million, driven by strong demand for premium products; EBIT margin expanded to 30% [6]. Operating Highlights - Adjusted EBIT and adjusted EBITDA improved 21% and 16% year over year, with both margins expanding by 400 basis points [7]. Balance Sheet - As of March 31, 2024, cash and cash equivalents were $1.25 billion, down from $1.62 billion at the end of 2023; long-term debt totaled $2.65 billion [8]. Cash Flow and Shareholder Returns - In Q1 2024, net cash provided by operating activities was $24 million, compared to a net cash outflow of $164 million in the previous year; free cash flow was negative $128 million [9]. - The company returned $182 million to shareholders through dividends and share repurchases, including a cash dividend of $52 million and $130 million in share repurchases [10]. Market Outlook - The company anticipates favorable conditions in North American building and construction markets, with expectations for net sales to align with Q2 2023 levels and EBIT margins around 20% [11][12]. - For 2024, general corporate expenses are projected between $240 million and $250 million, with interest expenses estimated at $70 million to $80 million [13]. Estimate Trends - Recent estimates have shown an upward trend, with a consensus estimate shift of 14.63% [14]. Investment Scores - Owens Corning has an average Growth Score of C and a value grade of B, placing it in the top 40% for the value investment strategy, resulting in an aggregate VGM Score of B [15]. Future Expectations - The upward trend in estimates suggests a promising outlook, with the company holding a Zacks Rank 1 (Strong Buy) and expectations for above-average returns in the coming months [16].