Owens Corning (NYSE: OC) reported quarterly earnings of $4.64 per share, beating the Zacks Consensus Estimate of $4.37 per share, and up nearly 10% from the same period one year earlier, with earnings of $4.22 per share; these figures are adjusted for non-recurring items.

Last quarter, the construction materials company exceeded earnings expectations by 18.09%, generating a 6.18% earnings surprise. Over the last four quarters, the company has surpassed consensus EPS estimates four times.

In the quarter ended June 2024, Owens Corning reported revenues of $2.79 billion, which fell short of the Zacks Consensus Estimate by 2.95%. This compares to revenues of $2.56 billion in the same period last year. Over the past four quarters, the company has exceeded consensus revenue estimates twice.

Owens Corning shares have increased by 10.9% since the beginning of the year, outperforming the S&P 500's gain of 8.7%.

Second-Quarter Business Performance

In the second quarter, the company increased earnings with strong performance in each of its businesses and grew revenue as a result of the acquisition of Masonite.

• Roofing net sales dropped 2% to $1.1 billion in the second quarter of 2023. This was due to lower volumes, offset by positive price realization and a favorable mix. Shingles volume slightly decreased but still outperformed the market. The EBIT increased from $35 million to $373 million, resulting in a 34% EBIT margin and a 35% EBITDA margin due to strong commercial execution.
• Insulation net sales increased by 1% to $916 million compared to the second quarter of 2023. Strong demand in North America drove the increase, while the European business was affected by a weaker macro environment. The EBIT grew by $20 million to $183 million, resulting in a 20% EBIT margin and a 26% EBITDA margin. Positive pricing and a favorable product mix offset lower volumes and costs associated with evaluating capacity expansion within the U.S. fiberglass network.
• Net sales for the Doors division from May 15 to June 30 were $311 million, excluding revenue from Masonite’s architectural segment, which was divested before Owens Corning’s acquisition. The division met company expectations despite market challenges in North America and Europe. EBIT was $34 million with an 11% margin, and EBITDA was $61 million with a 20% margin.
• In Q2 2023, composites net sales dropped 12% to $546 million due to lower volume and price declines in glass reinforcements. EBIT decreased to $61 million, with 11% EBIT margin and 19% EBITDA margin, attributed to lower prices and volumes in glass reinforcements, production downtime, and offset by favorable manufacturing and delivery costs.

What to Expect for Q3

While Owens Corning has outperformed the market so far this year, what does the next quarter look like? 

• The key economic factors influencing the company's business include U.S. residential repair and remodeling activity, U.S. housing starts, global commercial construction, and global industrial production.
• Owens Corning expects the North American building and construction markets to remain strong in the near-term due to continued demand for single-family new construction and non-discretionary repair and remodeling activity. Globally, slow economic growth persists due to macroeconomic trends and geopolitical tensions.
• In Q3 2024, the company anticipates low-20% net sales growth, including revenue from the legacy business and a full quarter of revenue from the Doors segment. The enterprise is expected to achieve a high teens EBIT margin and a low-20% EBITDA margin.

Analysts suggest a strong connection between short-term stock movements and changes in earnings estimates. 

The estimate revisions trend for Owens Corning is currently unfavorable, resulting in a Zacks Rank #4 (Sell) for the stock. This means that the shares are expected to underperform the market in the near future. It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. 

The current consensus EPS estimate is $4.15 on $3.1 billion in revenues for the coming quarter and $15.63 on $11.21 billion in revenues for the current fiscal year.