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TheStreet Open House

Why Owens Corning (OC) Stock Is Declining Today

NEW YORK (TheStreet) -- Shares of Owens Corning (OC) are down -4.62% to $39.39 after the company today lowered its 2014 full-year earnings outlook a a result of continued volume weakness in its roofing business.

In its first-quarter 2014 earnings release, the company stated that it expected to deliver $500 million in adjusted EBIT for full-year 2014 and noted that first-quarter volume weakness in its roofing business added risk to the company's financial outlook.

OC said that the weakness in roofing volumes experienced in the first quarter continued through April and May, and the company now estimates that roofing volumes for the first half of 2014 may be as much as 20% lower than first-half 2013 volumes.

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The company expects to recover a portion of this volume shortfall in the second half of the year. 

OC continues to see improvement in the year-over-year performance of both its insulation and composites businesses. Earnings growth in these two businesses is expected to more than offset the weaker financial performance in the roofing business year over year.

The company now expects to deliver full-year 2014 adjusted EBIT that will be greater than the prior year result of $416 million.

TheStreet Ratings team rates OWENS CORNING as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate OWENS CORNING (OC) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • OWENS CORNING reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, OWENS CORNING turned its bottom line around by earning $1.71 versus -$0.16 in the prior year. This year, the market expects an improvement in earnings ($2.38 versus $1.71).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Building Products industry. The net income increased by 445.4% when compared to the same quarter one year prior, rising from $22.00 million to $120.00 million.
  • The debt-to-equity ratio is somewhat low, currently at 0.62, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.02, which illustrates the ability to avoid short-term cash problems.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 5.5%. Since the same quarter one year prior, revenues slightly dropped by 5.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • You can view the full analysis from the report here: OC Ratings Report

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