Owens Corning (OC) Sold Out Conditions and Management Execution Should Drive Multiple Expansion - Jefferies
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Jefferies analyst Philip Ng reiterated a Buy rating and $135.00 price target on Owens Corning (NYSE: OC) after hosting investor meetings with Ken Parks (CFO) and walking away believing there is significant untapped earnings power in insulation & composites while the risk of a large downdraft in roofing is low.
The analyst stated "Insulation is expected to be sold out in 2021. Price realization has been strong & given such tight market conditions, OC is confident it should see good price realization on its 8% Jun 28 fiberglass increase, despite JM pushing its increase to Sep. If starts stabilize in the ~1.5 mil range, OC believes the industry can service demand with its current capacity and productivity improvements (2-3%/yr.)." Regarding roofing, he stated "Mgmt appears to have decent visibility into 3Q, and even assuming a typical seasonal slowdown in 4Q, with the industry on allocation, OC expects to run its assets hard in 4Q, which should help replenish inventory in the channel. This is keeping S/D tight & supporting good price realization, which coupled with the Jun increase, should more than offset the expected $100+ mil of inflation in roofing."
Shares of Owens Corning closed at $103.85 yesterday.
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