UPDATE: MKM Partners Downgrades Owens Corning (OC) to Sell
MKM Partners downgraded Owens Corning (NYSE: OC) from Neutral to Sell with a price target of $31.00 (from $37.00). Analyst Megan McGrath thinks risk to 2015 earnings isn't priced in.
"Although the company did not provide official 2015 guidance, we believe the color it provided by segment implies weaker EBIT growth than we had anticipated and, as a result, we are lowering our earnings forecasts. We don't believe that current valuation reflects the risks inherent in the business model, especially given last year's volatility in Roofing," said McGrath.
"We see 2 main risks to our Sell rating: 1) a meaningful change in Roofing, where volumes and pricing increase at the same time as asphalt pricing declines; and 2) that investors look beyond 2015, assuming a more "normalized" 2016. However, given that estimates were fairly consistently revised downward throughout 2013 and 2014, we do not have much confidence in 2016 forecasts. We note that even if we placed a 16x multiple on our FY16 estimate of $2.59 this would imply a price of $41, not leaving much upside with much greater implied risk," he added.
For an analyst ratings summary and ratings history on Owens Corning click here. For more ratings news on Owens Corning click here.
Shares of Owens Corning closed at $39.65 yesterday.