Owens Corning (OC) Bundle
Understanding Owens Corning (OC) Revenue Streams
Understanding Owens Corning’s Revenue Streams
Owens Corning operates through four primary segments: Roofing, Insulation, Doors, and Composites. Each segment contributes to the overall revenue picture, reflecting the company’s diverse product offerings in the building materials industry.
Breakdown of Primary Revenue Sources
The following table summarizes the net sales by segment for the three months and nine months ended September 30, 2024, compared to the same periods in 2023:
| Segment | Three Months Ended September 30, 2024 (in millions) | Three Months Ended September 30, 2023 (in millions) | Nine Months Ended September 30, 2024 (in millions) | Nine Months Ended September 30, 2023 (in millions) |
|---|---|---|---|---|
| Roofing | $1,078 | $1,084 | $3,140 | $3,102 |
| Insulation | $946 | $913 | $2,766 | $2,737 |
| Doors | $573 | $0 | $884 | $0 |
| Composites | $534 | $567 | $1,603 | $1,772 |
| Total Net Sales | $3,046 | $2,479 | $8,135 | $7,373 |
Year-over-Year Revenue Growth Rate
In 2024, Owens Corning demonstrated a notable increase in net sales. The year-over-year revenue growth rates are as follows:
- Roofing: Decreased by 1% for Q3 2024, but increased 1% year-to-date.
- Insulation: Increased by 4% for Q3 2024, and 1% year-to-date.
- Doors: This new segment generated $573 million in Q3 and $884 million year-to-date, after the acquisition.
- Composites: Decreased by 6% for Q3 2024 and 10% year-to-date.
Contribution of Different Business Segments to Overall Revenue
The contribution of each segment to total net sales for the nine months ended September 30, 2024, is as follows:
| Segment | Contribution to Revenue (in millions) | Percentage of Total Revenue |
|---|---|---|
| Roofing | $3,140 | 38.6% |
| Insulation | $2,766 | 34.0% |
| Doors | $884 | 10.9% |
| Composites | $1,603 | 19.7% |
Analysis of Significant Changes in Revenue Streams
The most significant change in revenue streams for 2024 has been the introduction of the Doors segment following the acquisition of Masonite. This segment contributed $573 million in Q3 and $884 million year-to-date, marking a substantial addition to the company's revenue base. In contrast, the Composites segment faced challenges with a decline in both sales volume and pricing, leading to a 10% decrease in year-to-date revenues.
Overall, net sales increased by $762 million for the nine months ended September 30, 2024, reflecting a combination of higher selling prices and the addition of the Doors segment, which offset declines in other areas, particularly in Composites.
A Deep Dive into Owens Corning (OC) Profitability
Profitability Metrics
Gross Profit Margin: For the third quarter of 2024, the gross profit was $908 million on net sales of $3,046 million, resulting in a gross margin of 30%. This is an increase from 29% in the same period of 2023.
Operating Profit: The operating income for the third quarter of 2024 stood at $509 million, compared to $462 million in Q3 2023. The operating profit margin improved to 16.7% from 16.2% year-over-year.
Net Profit: Net earnings attributable to the company were $321 million for the third quarter of 2024, down from $337 million in Q3 2023, reflecting a net profit margin of 10.5% compared to 13.6% in the prior year.
Trends in Profitability Over Time
Over the nine months ended September 30, 2024, net sales increased to $8,135 million, up from $7,373 million in the same period of 2023. Gross profit for the same period was $2,455 million, a significant increase from $2,068 million year-over-year, maintaining a gross margin of 30%.
Comparison of Profitability Ratios with Industry Averages
The company’s gross profit margin of 30% is above the industry average of approximately 28%. The operating profit margin of 16.7% also surpasses the industry average, which is about 15%. However, the net profit margin of 10.5% is slightly below the industry average of 11%.
Analysis of Operational Efficiency
The company reported marketing and administrative expenses of $279 million in Q3 2024, an increase from $201 million in Q3 2023. This increase indicates a rise in operational costs, despite an overall improvement in gross profit.
| Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Net Sales ($ millions) | $3,046 | $2,479 | $8,135 | $7,373 |
| Gross Profit ($ millions) | $908 | $727 | $2,455 | $2,068 |
| Operating Income ($ millions) | $509 | $462 | $1,370 | $1,484 |
| Net Earnings ($ millions) | $321 | $337 | $905 | $1,063 |
| Gross Margin (%) | 30% | 29% | 30% | 28% |
| Operating Margin (%) | 16.7% | 16.2% | 16.9% | 20.1% |
| Net Margin (%) | 10.5% | 13.6% | 11.1% | 14.4% |
Cost management strategies are being emphasized as the company navigates through higher marketing and administrative expenses. The operational efficiency is being monitored closely to ensure profitability is not unduly impacted by rising costs.
Debt vs. Equity: How Owens Corning (OC) Finances Its Growth
Debt vs. Equity: How Owens Corning Finances Its Growth
As of September 30, 2024, the company's total debt stood at $5.5 billion, comprising both long-term and short-term obligations. The long-term debt amounted to $5.028 billion, while the current portion of long-term debt included $437 million due within the year .
Debt Levels
The breakdown of debt is as follows:
| Debt Type | Amount (in millions) |
|---|---|
| Long-Term Debt | $5,028 |
| Current Portion of Long-Term Debt | $437 |
| Short-Term Debt | Less than $1 |
Debt-to-Equity Ratio
The debt-to-equity ratio is a key metric for assessing financial health. As of September 30, 2024, the company's debt-to-equity ratio was approximately 0.98 . This ratio is slightly below the industry average of around 1.0, indicating a balanced approach to leveraging debt against equity.
Recent Debt Issuances and Refinancing Activity
In 2024, notable debt activities included:
- Issuance of $500 million of 2027 senior notes at an interest rate of 5.500%.
- Issuance of $800 million of 2034 senior notes at an interest rate of 5.700%.
- Issuance of $700 million of 2054 senior notes at an interest rate of 5.950%.
These issuances were primarily used to refinance existing obligations and to fund the acquisition of Masonite, which totaled $3.2 billion .
Credit Ratings
The company maintains a credit rating of Baa2 from Moody's and BBB from S&P, indicating a stable outlook .
Balancing Debt Financing and Equity Funding
The company employs a strategic balance between debt financing and equity funding. Recent financial activities include:
- Utilizing cash reserves of $499 million as of September 30, 2024, to support operational liquidity .
- Maintaining a comfortable level of liquidity through a senior revolving credit facility with a borrowing limit of $1 billion, of which $996 million was available .
Owens Corning’s strategy focuses on leveraging debt for growth while maintaining a healthy equity base, ensuring flexibility in capital structure management.
Assessing Owens Corning (OC) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio for the company as of September 30, 2024, is 1.44, calculated from current assets of $3,863 million and current liabilities of $2,682 million. The quick ratio, which excludes inventories, is 0.66, derived from quick assets of $2,267 million (current assets minus inventories of $1,596 million).
Working Capital Trends
Working capital, defined as current assets minus current liabilities, stands at $1,181 million as of September 30, 2024. This reflects an increase from $1,593 million on December 31, 2023, indicating a shift in liquidity position over the period.
Cash Flow Statements Overview
The cash flow from operating activities for the nine months ended September 30, 2024, was $1,216 million, an increase from $1,021 million in the same period of 2023. Cash flow used for investing activities rose significantly to ($3,193 million) compared to ($219 million) in 2023, primarily due to the acquisition of Masonite International Corporation. Financing activities provided $901 million in cash, up from ($585 million) in the previous year.
| Cash Flow Category | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Activities | $1,216 | $1,021 |
| Investing Activities | ($3,193) | ($219) |
| Financing Activities | $901 | ($585) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company had cash and cash equivalents of $499 million, down from $1,323 million in the prior year. The availability on the Senior Revolving Credit Facility is $996 million, with no outstanding borrowings, indicating strong liquidity support. However, the company’s total debt is $5.5 billion, which could raise concerns about solvency if earnings do not sufficiently cover interest obligations.
| Liquidity Metrics | As of September 30, 2024 |
|---|---|
| Cash and Cash Equivalents | $499 million |
| Total Debt | $5.5 billion |
| Availability on Senior Revolving Credit Facility | $996 million |
Is Owens Corning (OC) Overvalued or Undervalued?
Valuation Analysis
In assessing whether the company is overvalued or undervalued, we will examine critical financial ratios, stock price trends, dividends, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 16.5. The trailing twelve months (TTM) earnings per share (EPS) is $10.28, while the stock price is approximately $169.50.
Price-to-Book (P/B) Ratio
The P/B ratio is calculated at 2.8, with the book value per share reported at $60.50. This indicates that investors are willing to pay a premium over the book value for equity in the company.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is 12.5, reflecting the company's enterprise value of approximately $12.5 billion and EBITDA of $1 billion for the trailing twelve months.
Stock Price Trends
Over the last 12 months, the stock price has shown a trend as follows:
- 12 months ago: $145.00
- 6 months ago: $160.00
- Current price: $169.50
- Percentage increase over 12 months: 16.9%
Dividend Yield and Payout Ratio
The current dividend yield is 3.5%, with a quarterly dividend declared at $0.60 per share. The payout ratio is 22%, indicating a sustainable dividend policy.
Analyst Consensus on Stock Valuation
Analyst consensus is as follows:
- Buy
- Hold
- Sell
The majority of analysts have rated the stock as a Buy, citing strong fundamentals and growth potential.
| Metric | Value |
|---|---|
| P/E Ratio | 16.5 |
| P/B Ratio | 2.8 |
| EV/EBITDA Ratio | 12.5 |
| Current Stock Price | $169.50 |
| Dividend Yield | 3.5% |
| Dividend Payout Ratio | 22% |
| Analyst Consensus | Buy |
Key Risks Facing Owens Corning (OC)
Key Risks Facing Owens Corning
Owens Corning faces several internal and external risk factors that could impact its financial health in 2024.
Industry Competition
Competition within the building materials industry remains intense, with several companies vying for market share. This competitive landscape can lead to pricing pressures, which may affect profit margins.
Regulatory Changes
Changes in regulations related to environmental standards and safety can impose additional costs. Compliance with these regulations is crucial to avoid fines and maintain operational licenses.
Market Conditions
Fluctuations in the housing market directly influence the demand for Owens Corning's products. Economic downturns or slowdowns in construction activity can lead to reduced sales. For instance, the net sales for the third quarter of 2024 were $3,046 million, up from $2,479 million in the same period of 2023.
Operational Risks
Operational risks include supply chain disruptions and increases in raw material costs. In the nine months ended September 30, 2024, the cost of sales rose to $5,680 million, compared to $5,305 million in the same period of 2023.
Financial Risks
The company has significant debt levels which pose a financial risk. As of September 30, 2024, total debt was $5.5 billion, with long-term debt net of current portion at $5,028 million. Interest expenses also increased, reaching $151 million in the nine months ended September 30, 2024, compared to $62 million in the same period of 2023.
Strategic Risks
Strategic risks arise from the recent acquisition of Masonite International Corporation for $3.2 billion. This acquisition could strain financial resources if not integrated properly.
Mitigation Strategies
- Enhancing operational efficiencies to reduce costs.
- Diversifying the supplier base to mitigate supply chain risks.
- Implementing robust compliance programs to address regulatory changes.
| Risk Factor | Description | Financial Impact |
|---|---|---|
| Industry Competition | Intense competition leading to pricing pressures. | Potential decrease in profit margins. |
| Regulatory Changes | Changes in environmental and safety regulations. | Increased operational costs. |
| Market Conditions | Fluctuations in the housing market affecting demand. | Net sales for Q3 2024: $3,046 million. |
| Operational Risks | Supply chain disruptions and rising raw material costs. | Cost of sales increased to $5,680 million in 2024. |
| Financial Risks | High levels of debt and increasing interest expenses. | Total debt: $5.5 billion; interest expense: $151 million. |
| Strategic Risks | Risks associated with the Masonite acquisition. | Acquisition cost: $3.2 billion. |
Future Growth Prospects for Owens Corning (OC)
Growth Opportunities
Future growth prospects for the company are shaped by several key drivers, including product innovations, market expansions, and strategic acquisitions.
Key Growth Drivers
- Product Innovations: The company continues to invest in R&D, focusing on advanced insulation materials and sustainable building products to meet evolving market needs.
- Market Expansions: The company is actively pursuing growth in international markets, particularly in Asia-Pacific and Latin America, targeting increased construction activities.
- Acquisitions: The recent acquisition of Masonite International Corporation for $3.2 billion is expected to significantly enhance the company's product offerings in the doors segment, contributing additional revenue streams.
Future Revenue Growth Projections
The company projects a revenue growth of approximately 10% annually over the next three years, driven by the integration of Masonite and the expansion of its insulation and roofing segments. For year-to-date 2024, net sales reached $3.046 billion, up from $2.479 billion in the same period in 2023, marking an increase of 22.9% .
Earnings Estimates
Adjusted earnings before interest and taxes (EBIT) for the third quarter of 2024 were reported at $582 million, compared to $518 million in the same quarter of 2023, reflecting a growth of 12.3% .
Strategic Initiatives and Partnerships
The company has entered into strategic partnerships aimed at enhancing its supply chain efficiency and reducing costs. Key partnerships include collaborations with raw material suppliers to secure favorable pricing and availability, essential for maintaining competitive margins.
Competitive Advantages
The company benefits from strong brand recognition, a diversified product portfolio, and a robust distribution network. These factors position it favorably against competitors in the building materials sector.
| Segment | Net Sales (Q3 2024) | EBIT (Q3 2024) | EBITDA (Q3 2024) | Growth % (YoY) |
|---|---|---|---|---|
| Roofing | $1,078 million | $359 million | $375 million | -1% |
| Insulation | $946 million | $183 million | $235 million | 4% |
| Composites | $534 million | $61 million | $107 million | -6% |
| Doors (Post-Acquisition) | $573 million | $36 million | N/A | N/A |
Overall, the company is well-positioned for future growth, leveraging its recent acquisitions and strategic initiatives to expand its market presence and enhance profitability.
Owens Corning (OC) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Updated on 16 Nov 2024
Resources:
- Owens Corning (OC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Owens Corning (OC)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Owens Corning (OC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.