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On Tuesday, RBC Capital Markets maintained their Outperform rating on Owens Corning (NYSE:OC) shares but reduced the price target from $224.00 to $212.00. The revision comes as the firm adjusts its expectations for the company’s fiscal year 2025 earnings per share (EPS), which they now forecast to be 6% lower. This change is attributed to the transition of the company’s Glass Reinforcements (GR) business to discontinued operations and a downward revision of estimates for the Doors segment, which has been showing continued weakness. According to InvestingPro data, the company currently trades at a P/E ratio of 13.8x and commands a market capitalization of $13.9 billion. The stock has seen challenging performance recently, declining 8.3% in the past week.
Despite the price target adjustment, RBC Capital analysts remain optimistic about Owens Corning’s prospects. They believe the company’s first-quarter roofing guide appears conservative, especially considering that Owens Corning’s fourth-quarter margin guidance was surpassed by more than 70 basis points. The analysts expect the company to benefit from solid and likely improving price/cost dynamics and stable volumes. Additionally, they note that insulation margins and price/costs are still healthy. The company maintains strong financial health, with InvestingPro analysis indicating a "GOOD" overall financial health score and liquid assets exceeding short-term obligations.
The firm also highlights Owens Corning’s strong free cash flow (FCF) and the anticipated proceeds from the Glass Reinforcements business, which should support ongoing capital returns to shareholders, even with an expected increase in capital expenditures (capex). RBC Capital’s stance reflects confidence in the company’s financial strategy and operational performance.
The report from RBC Capital concludes with a reaffirmation of the Outperform rating for Owens Corning, signaling that the analysts believe the stock will perform better than the overall market in the near future. Despite the lower price target, the firm’s outlook suggests that Owens Corning remains well-positioned in the market.
In other recent news, Owens Corning reported its fourth-quarter 2024 earnings, surpassing analyst expectations with an adjusted earnings per share (EPS) of $3.22, compared to the forecasted $2.90. The company also exceeded revenue projections, posting $2.84 billion against the expected $2.78 billion, marking a 23% year-over-year increase. Despite these positive results, the company’s stock experienced a decline, reflecting potential investor concerns over market conditions or future growth prospects. Owens Corning’s strategic acquisition of Masonite contributed to the revenue growth, along with expansions in manufacturing capabilities. The company returned over half of its free cash flow to shareholders in 2024, continuing its trend of strong financial performance. Looking ahead, Owens Corning anticipates a revenue increase in the mid-20% range for the first quarter of 2025, supported by product innovations and market expansion initiatives. Additionally, the company has been recognized for its operational excellence, being named to The Wall Street Journal’s top 250 best-managed companies and earning a place on the Dow Jones Sustainability Index for the fifteenth consecutive year.
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