Building and construction materials manufacturer Owens Corning (NYSE:OC) reported revenue ahead of Wall Street’s expectations in Q4 CY2024, with sales up 23.3% year on year to $2.84 billion. Its non-GAAP profit of $3.22 per share was 10.7% above analysts’ consensus estimates.
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Owens Corning (OC) Q4 CY2024 Highlights:
- Revenue: $2.84 billion vs analyst estimates of $2.76 billion (23.3% year-on-year growth, 2.7% beat)
- Adjusted EPS: $3.22 vs analyst estimates of $2.91 (10.7% beat)
- Adjusted EBITDA: $629 million vs analyst estimates of $582.9 million (22.1% margin, 7.9% beat)
- Operating Margin: -8.5%, down from 14.3% in the same quarter last year
- Free Cash Flow Margin: 16.9%, down from 24.4% in the same quarter last year
- Market Capitalization: $14.19 billion
“2024 was a transformative year for Owens Corning as we successfully executed three major strategic moves to reshape and focus the company on building products in North America and Europe, while consistently delivering higher, more resilient earnings and cash flow,” said Chair and Chief Executive Officer Brian Chambers.
Company Overview
Credited with the discovery of fiberglass, Owens Corning (NYSE:OC) supplies building and construction materials to the United States and international markets.
Home Construction Materials
Traditionally, home construction materials companies have built economic moats with expertise in specialized areas, brand recognition, and strong relationships with contractors. More recently, advances to address labor availability and job site productivity have spurred innovation that is driving incremental demand. However, these companies are at the whim of residential construction volumes, which tend to be cyclical and can be impacted heavily by economic factors such as interest rates. Additionally, the costs of raw materials can be driven by a myriad of worldwide factors and greatly influence the profitability of home construction materials companies.
Sales Growth
A company’s long-term performance is an indicator of its overall quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for years. Over the last five years, Owens Corning grew its sales at a decent 8.9% compounded annual growth rate. Its growth was slightly above the average industrials company and shows its offerings resonate with customers.
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Owens Corning’s recent history shows its demand slowed as its annualized revenue growth of 6% over the last two years is below its five-year trend. We also note many other Home Construction Materials businesses have faced declining sales because of cyclical headwinds. While Owens Corning grew slower than we’d like, it did perform better than its peers. 
This quarter, Owens Corning reported robust year-on-year revenue growth of 23.3%, and its $2.84 billion of revenue topped Wall Street estimates by 2.7%.
Looking ahead, sell-side analysts expect revenue to grow 9.1% over the next 12 months, an improvement versus the last two years. This projection is particularly healthy for a company of its scale and indicates its newer products and services will catalyze better top-line performance.
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Operating Margin
Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.
Owens Corning has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 13%. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.
Analyzing the trend in its profitability, Owens Corning’s operating margin rose by 12.2 percentage points over the last five years, as its sales growth gave it immense operating leverage.
In Q4, Owens Corning generated an operating profit margin of negative 8.5%, down 22.8 percentage points year on year. Since Owens Corning’s operating margin decreased more than its gross margin, we can assume it was recently less efficient because expenses such as marketing, R&D, and administrative overhead increased.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Owens Corning’s EPS grew at an astounding 28.3% compounded annual growth rate over the last five years, higher than its 8.9% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
Diving into Owens Corning’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, Owens Corning’s operating margin declined this quarter but expanded by 12.2 percentage points over the last five years. Its share count also shrank by 21.1%, and these factors together are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth. 
Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.
For Owens Corning, its two-year annual EPS growth of 10.8% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.
In Q4, Owens Corning reported EPS at $3.22, up from $3.21 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Owens Corning’s full-year EPS of $15.83 to grow 2.6%.
Key Takeaways from Owens Corning’s Q4 Results
Revenue, EBITDA, and EPS all beat this quarter. Zooming out, we think this was a solid quarter. The stock traded up 1.2% to $167.49 immediately following the results.
Owens Corning may have had a good quarter, but does that mean you should invest right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
