The Owens Corning (OC) earnings call gave investors even more reason to be optimistic that the earnings release did.
2008 Stated Goals Being Met:
* Will reduce our costs by $100 million. That program is fully implemented.
* Composites operating margins would approach double digits for 2008. They were 9.6% in the first quarter.
* Achieve $30 million in acquisition synergies. That’s on track.
* Continue to manage a strong balance sheet. Finished the quarter with net debt of slightly more than $2 billion, a good result.
* Remain confident in guidance of annual adjusted EBIT of $240 million for 2008.
Results:
* Composite Solutions business grew more than 80% representing about half of Owens Corning’s total sales
* Are close to expanding composites presence in Russia and also in China. You’ll hear more about those opportunities in the future.
* If you went down to your local, retail big box, Home-Depot (HD) or Lowe’s (LOW) and buy insulation there, you can probably reinsulate your attic for $200 or $300 worth of material.
* Some of the pricing actions for the late first quarter and second quarter are beginning to show up and they are starting to see some positive pricing in their books. This is the same theme stated in the Sherwin Williams (SHW) call.
Like Sherwin, Owens has diversified its earnings profile from one dependent on US housing to one with an international profile. While the decimation of the US housing market has hurt earnings, the evisceration of them that would have taken place without management’s moves has been avoided.
While housing still hurts, Sherwin has continued to grow earnings in spite of it and Owens (about a year behind SHW in diversifying) suffered only an 8% decline. As housing both stabilizes and then turns, we can expect significant upside for both.
Disclosure (“none” means no position):Long OC, SHW, None
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