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Owens Corning (OC)

This building materials company beat earnings estimates by $0.22 last quarter. Recently, the shares were upgraded by Longbow to ‘Buy’ and to ‘Outperform’ by RBC Capital Mkts.

Owens Corning (OC)
From Dow Theory Forecasts

Owens Corning (OC) is being added to the Long-Term Buy List. The company makes insulation, roofing, and fiberglass composites used in residential and commercial buildings.

Owens topped consensus estimates for both earnings per share and revenue in the December quarter. Although Owens grew sales just 2% last year, cash from operations jumped 68% and free cash flow reached $263 million, versus a negative $6 million in 2014.

In Quadrix®, Owens earns an Overall rank of 92, supported by above average scores for all six categories. The improving housing market and lower material costs boosted profits for all three segments in 2015, and management expects more growth in the year ahead. Rising analyst estimates call for 16% higher earnings per share on 3% sales growth in 2016.

Shares trade at 17 times trailing earnings and 15 times estimated 2016 profits, roughly 25% below medians for the S&P 1500 building-products industry. Shares look even cheaper relative to peers based on trailing operating cash flow and free cash flow, as large noncash amortization expenses drag on Owens’ net income.

Richard J. Moroney, CFA, Dow Theory Forecasts,, 800-233-5922, March 7 2016