Building and construction materials manufacturer Owens Corning (NYSE: OC) missed Wall Street’s revenue expectations in Q3 CY2025, with sales falling 2.9% year on year to $2.68 billion. Next quarter’s revenue guidance of $2.15 billion underwhelmed, coming in 12.5% below analysts’ estimates. Its non-GAAP profit of $3.67 per share was 1.2% below analysts’ consensus estimates.

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Company Overview

Credited with the discovery of fiberglass, Owens Corning (NYSE: OC) supplies building and construction materials to the United States and international markets.

Revenue Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, Owens Corning grew its sales at a solid 9.6% compounded annual growth rate. Its growth beat the average industrials company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Owens Corning’s recent performance shows its demand has slowed as its annualized revenue growth of 5.8% over the last two years was below its five-year trend.

This quarter, Owens Corning missed Wall Street’s estimates and reported a rather uninspiring 2.9% year-on-year revenue decline, generating $2.68 billion of revenue. Company management is currently guiding for a 24.3% year-on-year decline in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to decline by 3.9% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and indicates its products and services will face some demand challenges.

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Operating Margin

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Owens Corning has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 14.4%. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.

Analyzing the trend in its profitability, Owens Corning’s operating margin decreased by 13.6 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q3, Owens Corning generated an operating margin profit margin of negative 12.2%, down 30.6 percentage points year on year. Conversely, its gross margin actually rose, so we can assume its recent inefficiencies were driven by increased operating expenses like marketing, R&D, and administrative overhead.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Owens Corning’s EPS grew at an astounding 26.7% compounded annual growth rate over the last five years, higher than its 9.6% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t improve.

We can take a deeper look into Owens Corning’s earnings quality to better understand the drivers of its performance. A five-year view shows that Owens Corning has repurchased its stock, shrinking its share count by 23.8%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Owens Corning, its two-year annual EPS growth of 3% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q3, Owens Corning reported adjusted EPS of $3.67, down from $4.38 in the same quarter last year. This print slightly missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. Over the next 12 months, Wall Street expects Owens Corning’s full-year EPS of $14.07 to shrink by 4.3%.

Key Takeaways from Owens Corning’s Q3 Results

We struggled to find many positives in these results. Its revenue guidance for next quarter missed and its revenue fell slightly short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 8.6% to $112.21 immediately following the results.

Owens Corning underperformed this quarter, but does that create an opportunity to invest right now? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.