In an earnings call on April 26, Owens Corning (OC:NYSE) reported revenue of $2.33 billion for the first-quarter 2023, down 0.6% over the same period last year but exceeding expectations according to financial analysts.
The construction materials manufacturer reported earnings of $2.77 per share compared to $2.84 in the year-ago quarter but exceeded the EPS estimate of $2.20, which made investors happy. The company’s stock was up .93% at press time on the New York Stock Exchange.
While the media tends to watch year-over-year changes as a leading indicator, reaction in the financial press has been positive and reflected by the company’s share price increase. Wall Street analysts tend to look at the metrics beyond headline numbers and seem pleased with what OC said in its earnings call.
Some takeaways from the first-quarter report included OC’s net earnings of $383 million. Zack’s Equity Research, a leading financial analysis firm, noted the surprise in earnings as it was expected OC would post a decline from the previous quarter. Instead, the company exceeded expectations by more than 25%.
Over the last four quarters, OC has surpassed EPS consensus estimates four times. The company has outperformed the market so far this year, with shares adding 17.2% since the beginning of 2023 versus the S&P 500’s gain of 6.1%
“In the first quarter, each of our segments performed well relative to market conditions, especially our North American residential businesses, demonstrating the strength of our customer partnerships, the value of our product lines, and the power of our brand,” Board Chair and Chief Executive Officer Brian Chambers said in the earnings call, according to the Wall Street Journal.
“In addition to driving strong financial performance in the near-term, we continue to make strategic investments that will expand our growth potential and enhance our earnings over the long-term,” Chambers added.
Enterprise Strategy and Q1 2023 Highlights
OC continues to invest in accelerating new product and process innovations to support its customers and generate additional growth. In the first quarter, it launched 11 new or refreshed products. As well, it continues to be recognized as a leader in environmental, social and governance matters.
In March, the company was honored by Ethisphere as one of the 2023 World’s Most Ethical Companies, marking the sixth consecutive year it has been recognized with this distinction. It was one of two honorees in the Construction and Building Materials industry.
In May, OC plans to issue its 17th annual Sustainability Report, which will highlight the company’s ongoing aspirations to “double the positive impact” of its products, halve its environmental footprint, “protect its people, advance inclusion and diversity, and positively impact its community,” the report noted.
"We remain committed to maintaining an investment-grade balance sheet with free cash conversion at or above 100% and returning approximately 50% of free cash flow to shareholders over time," Executive Vice President and Chief Financial Officer Ken Parks said in the call. “Our first quarter cash flow reflected more normal seasonal trends resulting in a net cash outflow driven by the timing of working capital and capital investments.”
Perhaps the biggest factor in making analysts and investors smile is that the company returned $183 million to shareholders through dividends and share repurchases during the first quarter. Owens paid a quarterly cash dividend of $0.52 per common share, an approximately 50% increase compared with the associated prior quarterly dividends; it also repurchased 1.5 million shares of common stock.
Looking Ahead: Q2 2023 and Beyond
For second-quarter 2023, the company said it expects a moderate decline in net sales versus the comparable quarter in the prior year while continuing to generate mid-teen EBIT margins. In the near term, the company said it expects many of its end markets to remain challenging as the impacts of ongoing inflation, higher interest rates, and continued geopolitical tensions result in slower global economic growth.
Economic factors that impact OC’s businesses include residential repair and remodeling activity, U.S. housing starts, global commercial construction activity, and global industrial production.