Owens Corning Delivers Q3 Earnings Beat, Forecasts Strong Q4 Despite Market Headwinds

Owens Corning Inc. OC reported a 23% year-over-year growth in third-quarter net sales to $3.046 billion, marginally beating the consensus of $3.043 billion.

Sales by segments: Composites $534 million (-6%), Insulation $946 million (+4%), and Roofing $1.1 billion (relatively flat).

Doors reported revenue in its first full quarter, with net sales of $573 million. The company noted that market conditions remained challenging for this business, with decreased discretionary repair and remodel spending impacting demand and price.

Adjusted EPS was $4.38, up from $4.18 a year ago, above the consensus of $4.05.

Adjusted EBIT increased to $582 million from $518 million, with a 19% margin (vs. 21% prior-year quarter). Adjusted EBITDA rose 19% to $766 million, and the margin contracted to 25% from 26% a year ago quarter.

Operating cash flow totaled $699 million, up from $691 million, and free cash flow stood at $558 million (-4%). During the third quarter, the company returned $252 million through dividends and share repurchases.

Executive Vice President and Chief Financial Officer Todd Fister said, ”We also executed a $200 million share repurchase program that delivered on our commitment to return significant cash to shareholders.”

Q4 Outlook: Despite tougher market conditions, the company anticipates strong performance driven by portfolio and cost structure changes.

The company expects net sales growth of around 20%, with legacy business revenue slightly below fourth-quarter FY23, plus added revenue from the Doors segment.

The company forecasts a mid-teens EBIT margin and an EBITDA margin of about 20% for the fourth quarter of FY24.

Owens Corning expects near-term demand to be impacted by ongoing challenging conditions in most markets and normalizing seasonality.

2024 Outlook: Owens Corning currently expects general corporate expenses of around $250 million (vs. $255 million-$265 million prior) and capital additions of ~$650 million.

Investors can gain exposure to the stock via SPDR Series Trust SPDR Homebuilders ETF XHB and SmartETFs Sustainable Energy II ETF SOLR.

Price Action: OC shares traded lower by 4.11% at $175.05 premarket at the last check Wednesday.

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