Why BofA Downgrades Homebuilders Owens Corning, Dream Finders Homes

Zinger Key Points
  • Owens Corning has “relatively high new construction exposure,” says the BofA Securities analyst.
  • The backdrop for Dream Finders Homes is more challenging than for other builders.

New home demand has deteriorated over the past few weeks due to the spike in mortgage rates, a sharp decline in consumer confidence and the weaker economic growth outlook, according to BofA Securities.

BofA On Owens Corning

Analyst Rafe Jadrosich downgraded the rating for Owens Corning OC from Buy to Underperform, while reducing the price target from $119 to $80.

The company has “relatively high new construction exposure,” estimated at more than a third of insulation and 20% of roofing, the analyst wrote in the note.

“In insulation, we now expect volume to decline ~10% YoY in 2023 and margins to compress. Composites could slow in 2023 with weaker industrial demand,” he added. Jadrosich further mentioned there seems to be a limited upside to roofing, with “margins and sales likely near peak levels.”

BofA On Dream Finders Homes

Analyst Jadrosich downgraded the rating for Dream Finders Homes Inc DFH from Neutral to Underperform, while reducing the price target from $18 to $ $10.50.

The backdrop for Dream Finders Homes is more challenging than for other builders, the BofA analyst said in the note. He explained that the company has “high exposure to entry-level homebuyers,” higher financial leverage than peers and “a significant portion of DFH’s optioned land (estimate >40%) was contracted in the last year at potentially elevated land prices.”

OC, DFH Price Action: Owens Corning’s stock had declined by 2.03% to $74.64, while shares of Dream Finders Homes had declined by 9.48% to $10.70 at the time of publication Friday.

Photo: Kanjana Kawfang via Shutterstock

Posted In: BofA SecuritieshomesHousingRafe JadrosichAnalyst ColorDowngradesPrice TargetSmall CapAnalyst RatingsTrading IdeasReal Estate

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on Bankrate.com. The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the Bankrate.com rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.