Have you been paying attention to shares of Owens Corning (OC)? Shares have been on the move with the stock up 12.5% over the past month. The stock hit a new 52-week high of $119.15 in the previous session. Owens Corning has gained 38.5% since the start of the year compared to the 20.7% move for the Zacks Construction sector and the 20.8% return for the Zacks Building Products - Miscellaneous industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on April 26, 2023, Owens Corning reported EPS of $2.77 versus consensus estimate of $2.2.
For the current fiscal year, Owens Corning is expected to post earnings of $10.52 per share on $9.27 billion in revenues. This represents a -18.32% change in EPS on a -5.05% change in revenues. For the next fiscal year, the company is expected to earn $11.07 per share on $9.39 billion in revenues. This represents a year-over-year change of 5.26% and 1.35%, respectively.
Owens Corning may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Owens Corning has a Value Score of B. The stock's Growth and Momentum Scores are D and A, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 11.2X current fiscal year EPS estimates, which is not in-line with the peer industry average of 16.6X. On a trailing cash flow basis, the stock currently trades at 5.9X versus its peer group's average of 10.1X. Additionally, the stock has a PEG ratio of 1.96. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Owens Corning currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Owens Corning meets the list of requirements. Thus, it seems as though Owens Corning shares could have a bit more room to run in the near term.
How Does OC Stack Up to the Competition?
Shares of OC have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Construction Partners, Inc. (ROAD). ROAD has a Zacks Rank of # 2 (Buy) and a Value Score of B, a Growth Score of A, and a Momentum Score of F.
Earnings were strong last quarter. Construction Partners, Inc. beat our consensus estimate by 38.89%, and for the current fiscal year, ROAD is expected to post earnings of $0.70 per share on revenue of $1.56 billion.
Shares of Construction Partners, Inc. have gained 10.3% over the past month, and currently trade at a forward P/E of 45.05X and a P/CF of 18.84X.
The Building Products - Miscellaneous industry is in the top 18% of all the industries we have in our universe, so it looks like there are some nice tailwinds for OC and ROAD, even beyond their own solid fundamental situation.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report