Owens Corning (OC) Misses Q2 EPS by 28c, Slight Miss on Revenues; Offers FY18 Updated Outlook

Owens Corning (NYSE: OC) reported Q2 EPS of $1.17, $0.28 worse than the analyst estimate of $1.45. Revenue for the quarter came in at $1.82 billion versus the consensus estimate of $1.86 billion.

• Company Grew Net Sales by 14% to $1.8 Billion;
• Pricing Momentum Expected to Drive Strong Second-Half Performance Improvement,
• Resulting in an Adjusted EBIT Outlook of $925 Million to $975 Million for 2018
• Insulation grew EBIT by $20 million, despite manufacturing productivity headwinds
• Roofing produced 19% EBIT margins on strong sequential price improvement
• Composites declined to $71 million of EBIT on higher manufacturing costs
• Full-year outlook continues to reflect strong free cash flow conversion

2018 Outlook

• The company continues to expect an environment consistent with consensus expectations for U.S. housing starts and global industrial production growth.
• In Insulation, the company expects to deliver EBIT growth of approximately $150 million. First-half EBIT improved $47 million versus the prior year. The second-half EBIT improvement compared with the prior year is expected to accelerate to over $100 million based on a larger pricing benefit, stronger manufacturing performance and a continued contribution from acquisitions.
• In Roofing, the company expects the overall U.S. asphalt shingle market to be down mid-single digits on lower storm demand. The company’s shingle volumes trailed the market in the quarter and the first-half. During these periods, the U.S. asphalt shingle market experienced high growth in the U.S. Eastern seaboard, where the company has a lower than average market position. The company estimates that approximately 50% of the first-half volume decline was attributable to geographic mix with the remainder associated with timing of shipments. Geographic mix is expected to affect full-year volumes. Pricing performance continues to be strong and the company expects to offset the impact of persistent asphalt and transportation inflation.
• In Composites, the company expects continued growth in the glass fiber market, driven by global industrial production growth. The company now expects EBIT to be slightly below the prior year as a result of higher manufacturing costs, a slightly lower volume outlook, and higher than anticipated inflation.
• The company estimates an effective tax rate of 26% to 28%, and a cash tax rate of 10% to 12% on adjusted pre-tax earnings, due to the company’s U.S. tax net operating loss and foreign tax credit carryforwards.
• The company has improved its outlook for general corporate expenses to be between $135 million and $140 million in 2018. Capital additions in 2018 are expected to total approximately $500 million. Interest expense is expected to be between $125 million and $130 million.
• In 2018, the company expects to convert adjusted earnings into free cash flow at about 100%.
• The company expects the price momentum generated in the first-half to drive substantial earnings growth in the second-half, resulting in a full-year adjusted EBIT outlook of $925 million to $975 million.

“Owens Corning grew revenue by 14% on the contribution of Insulation acquisitions and successful pricing actions in both Roofing and Insulation. The company made significant commercial progress in the first-half of the year, partially offset by operational headwinds,” said Chairman and Chief Executive Officer Mike Thaman. “In the second-half, we expect continued commercial execution and improved operational performance. We expect strong financial results for 2018 with momentum heading into 2019.”

For earnings history and earnings-related data on Owens Corning (OC) click here.

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