Owens Corning (OC) stock intrinsic value fair value estimate & owner earnings analysis

Owens Corning now makes three things for buildings: asphalt roofing shingles and components (Roofing, 43% of 2025 segment sales), glass-fiber, mineral-wool and foam insulation (Insulation, 36%) and interior and exterior doors (Doors, 21%, the Masonite business acquired in May 2024). 2025 sales from the continuing businesses were $10.1 billion: about 82% in the United States, 6% elsewhere in North America (Canada and Mexico), 11% in Europe and about 1% in Asia Pacific and the rest of the world. More than 80% of roofing demand is repair and replacement of existing roofs, which homeowners cannot put off for long. The company finished selling its glass reinforcements business on April 30, 2026, receiving $370 million. How we measure earnings. We value the cash the business generates for its owners: operating cash flow, with swings in working capital taken out and stock-based pay ($71 million in 2025) counted as a real cost, less the capital spending needed to keep the business where it is. On that basis owner earnings were $4.05 to $5.50 a share in 2016-2019, $6.38 in 2020, then $10.93 (2021), $13.88 (2022), $12.91 (2023), $13.46 (2024) and $11.06 (2025). The jump after 2020 came from much wider margins. Roofing earned about 19% of sales before depreciation and amortization in 2019 ($455 million operating profit plus $54 million depreciation on $2,634 million of sales), against 32% in 2025 ($1,411 million on $4,437 million). Insulation went from about 16% to 23%. Those wider margins have now held for five years, including 2025, when roofing volumes fell about 7% and price increases still added $129 million. We treat them as the business as it stands, and we test what happens if they fade in the bear case. The historical per-share figures include the glass reinforcements business and describe a slightly different company. So we rebuilt a normal year for the business that remains. Roofing and insulation earned about $2.3 billion before depreciation in a middle year (2023-2025 range $2.26-2.48 billion). Doors earned about $200 million, below its 2025 level of $232 million because 2026 is running weaker. From that we subtract about $225 million of corporate costs and $30 million of recurring restructuring. We also subtract about $285 million of cash interest: $271 million was paid in 2025, and roughly $0.94 billion of debt due within a year will likely be refinanced at higher rates. Then come about $300 million of cash taxes, $30 million of pension and similar payments, and about $700 million of capital spending. That leaves about $930 million, or $11.54 a share on the 80.6 million diluted shares outstanding in mid-2026. This is close to what the remaining business actually produced in 2025 (about $900 million), and consistent with the 2023-2025 per-share figures above once the sold business is removed. Capital spending is the judgement call. It was $735 million in 2025, it is guided to about $800 million in 2026, and it averaged 5.9% of sales over ten years. We charge the whole $800 million in 2026, even though part of it pays for new insulation capacity, and $700 million a year after that. Two things are not cash costs and are added back: a $1,135 million write-down of Doors goodwill in 2025, and $148 million a year of amortization of acquired intangibles (up from $92 million in 2023). The decay those represent is carried instead by giving Doors no growth in any case. The remaining $380 million of Doors goodwill is, in the company's words, still at risk. Where things stand now. 2025 owner earnings fell 17.8% a share. 2026 is worse. First-quarter roofing volumes fell about 14% and roofing margin dropped to 24%. The quarter also carried a $32 million recall charge on Paroc marine insulation and $43 million of restructuring. The second quarter was close to the prior year (roofing margin 34%), helped by $25 million of tariff refunds and by distributors buying ahead. The company expects third-quarter sales of $2.6-2.7 billion at a lower margin and about $40 million of extra asphalt and freight costs linked to the Iran conflict. We put full-year 2026 owner earnings at about $500 million, well below 2025, partly because of the $800 million capital program. Base case ($274 a share). 2026 at about $500 million. 2027 recovers to about $740 million as capital spending eases and this year's one-time costs fall away. 2028 returns to the normal $930 million, a level the remaining business reached in 2025 under today's conditions. From there roofing and insulation earnings grow 2% a year and Doors stays flat. The 2% rests on demonstrated pricing, not volume. Owens Corning has put through shingle price increases year after year, including in 2025 against falling volumes and again in April and June 2026. It is well below the roughly 7% a year Roofing sales grew from 2017 to 2025. We give no credit for the new Kansas City insulation line or the restart of the Nephi, Utah plant, because no customer has contracted for their output. About two-thirds of the base value comes from years after 2036. That is reasonable for a business whose demand comes from the steady need to replace roofs on the existing housing stock, but it means the answer depends heavily on margins lasting. Bear case ($106 a share). Pricing discipline in shingles and insulation weakens, and margins give back roughly half their post-2020 gain: Roofing to about 25% and Insulation to about 19%, the levels of the first quarter of 2026. The company itself names competitive pricing and storm activity as roofing risks. Doors stays depressed at about $130 million, and refinancing the debt costs more. Owner earnings settle at about $505 million with no growth, similar in dollars to 2016-2019 but now carried by a bigger and more indebted company. Even in this case the business is worth considerably more than its roughly $5.1 billion of debt. Bull case ($411 a share). Roofing and insulation margins hold at 2024 levels. The new insulation capacity fills. Doors returns to its 2025 profit. Capital spending drops back to about $650 million. Owner earnings reach about $1.2 billion by 2028, below the 2022 level of $1.36 billion, which still included the sold business. They then grow 3% a year to 2036 and 2.5% after that. Changes since our previous analysis. The base value moves from $263 to $274. The share count is lower after continued buybacks (1.7 million shares repurchased in the first half of 2026). We now let the 2% pricing-driven growth run past 2035 instead of slowing it, because the evidence for it does not expire. Working against both, our normal earnings level is lower (about $930 million versus about $1.0 billion) because we now charge higher ongoing capital spending and higher refinancing costs, and our 2026 estimate is lower (about $500 million versus $650 million). We also corrected the sales geography: the roughly 6% outside the US, Europe and Asia is mostly Canada and Mexico, not Asia. What would make this wrong. Roofing margin is the main risk. If shingle price competition returns margins to the 19-23% of 2017-2019, the bear case becomes likely. The two largest customers accounted for about 25% and 11% of receivables at the end of 2025. Our estimate of how much the sold glass reinforcements business contributed to past cash flow is built from its disclosed profit and capital spending, because the company does not report its cash flow separately. Given cyclical housing demand, dependence on margins holding and about $5.1 billion of debt, the margin-of-safety price sits at a wide discount to the base value.