Market Overview

Insulation Momentum Is Already Priced Into Owens Corning, Goldman Sachs Says In Downgrade

Insulation Momentum Is Already Priced Into Owens Corning, Goldman Sachs Says In Downgrade
Related OC
8 Biggest Price Target Changes For Thursday
Benzinga's Top Upgrades, Downgrades For October 25, 2018
Real Estate Struggles As Markets Enter Correction (Seeking Alpha)

Since the shares of Owens Corning (NYSE: OC) were added to Goldman Sachs' conviction list Feb. 17, 2017, they have jumped 41 percent versus the S&P 500's 11.4-percent gain over the same time frame. 

The Analyst 

Analyst Samuel Eisner downgraded Owens Corning from Buy to Neutral and lowered the price target from $94 to $90.

The Thesis

Although Owens Corning could see upside to EBIT from insulation pricing, the theme is already well-known and reflected in the shares, Eisner said in a Wednesday note.

The acquisitions of Paroc and Pittsburgh Corning expanded Owens Corning's geographic reach, thermal exposure and end markets, the analyst said. 

The consensus EBIT estimate for the segment has increased 58 percent since January 2017, Eisner said, but the analyst is less positive on upward surprises to 2018 EBIT due to other factors such as inflation.

The roofing segment's margins are likely to be 20 percent despite historically weak pricing across the asphalt shingle industry, Eisner said. Despite an aggressive price compression estimate for 2019 and 2020 — given that 51 percent of distribution is controlled by three large players — Goldman Sachs still estimates a 19.7-percent average margin through 2020.

Alpha is likely to come from multiple expansion, Eisner said. Owens Corning needs to execute on integration and ride out some cyclical volatility before the market assigns a higher multiple, he said. 

The Price Action

Owens Corning shares were up about 33 percent over the past year through Tuesday.

The stock was down 0.62 percent at the time of publication Wednesday afternoon. 

Related Links:

Cramer's Top Stock Picks Post Hurricane Harvey

A Pair Trade In Building Materials From B. Riley FBR: Buy Trex, Neutral On BMC

Photo courtesy of Owens Corning. 

Latest Ratings for OC

Oct 2018Credit SuisseMaintainsNeutralNeutral
Oct 2018BarclaysUpgradesEqual-WeightOverweight
Oct 2018Seaport GlobalDowngradesBuyNeutral

View More Analyst Ratings for OC
View the Latest Analyst Ratings

Posted-In: Goldman Sachs Samuel EisnerAnalyst Color Downgrades Price Target Analyst Ratings Best of Benzinga


Related Articles (OC)

View Comments and Join the Discussion!

Latest Ratings

View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Mid-Afternoon Market Update: Dow Turns Positive; RMG Networks Holding Shares Plummet

Toys 'R' Us Aftershocks: Stifel Pessimistic On Hasbro, Mattel Ahead Of Q1 Prints