Owens Corning Q2 FY2026 earnings call

• Safety and Operational Culture

  • Delivered a Q2 recordable incident rate of 0.75 under the Safer Together operating framework.
  • Held the second annual Global Safety Week to reinforce a shared commitment to workplace safety.
  • Recognized for the 72nd consecutive year on the Fortune 500, reflecting long-term company strength.

• Strategic Positioning and Portfolio

  • Completed a strategic pivot to become a large-scale, residential-focused branded building products company with three complementary, market-leading businesses: Roofing, Insulation, and Doors.
  • Over 80% of roofing demand comes from non-discretionary repair and replacement, providing durable cycle resiliency; premium duration shingles represent the majority of shingle sales, with a growing contractor network.
  • Insulation has balanced exposure across North American residential, North American non-residential, and European markets, benefiting from secular trends of higher energy efficiency requirements and product substitution toward high-performance insulation.
  • Doors is the most complete door and door system offering in North America, with a vertically integrated model; 135 million of run rate enterprise cost synergies have been achieved from the 2024 acquisition, exceeding the original 125 million target, with an additional 75 million of structural cost improvements identified.

• Capital Investment and Productivity

  • Total 2026 planned capital investment is $800 million, with more than half allocated to productivity and growth initiatives.
  • Key ongoing projects: a new fiberglass line in Kansas City (coming online 2027, dedicated to non-residential applications), a new roofing plant in Alabama (expected online mid-2028), and a recently commissioned self-adhere underlayment line in Houston that strengthens the high-margin roofing components portfolio.
  • Annual adjusted EBITDA margins have improved from an average 18% (2015-2020) to low-to-mid 20% post-2020, with 5 consecutive years of margins above 20%.

• Commercial and Digital Initiatives

  • Deploying an integrated go-to-market strategy that leverages the Owens Corning brand and enterprise commercial strength across all three product lines, driving increased distribution placement for Doors.
  • Rolled out an AI analytics model in roofing to analyze customer purchase data and identify changing patterns, enabling earlier commercial team engagement; the capability is already generating value and will be scaled across the enterprise.

• Capital Allocation and Leadership

  • Disciplined balanced capital allocation framework: invest in core businesses, return capital to shareholders, and maintain investment-grade balance sheet flexibility.
  • Returned approximately $5 billion to shareholders via dividends and share repurchases since 2019, and has tripled the quarterly dividend per share; on track to return $2 billion total in 2025 and 2026, with $327 million returned year-to-date 2026.
  • Announced a leadership transition: Jonathan Collins will join as CFO on August 10, 2026, and current CFO Todd Fister will transition to President and Chief Operating Officer.

1. Roofing: Q2 2026 sales were approximately $1.3 billion, flat year-over-year, accounting for 46.4% of total company revenue. EBITDA came in at $441 million, with an EBITDA margin of 34%. Volume was slightly ahead of the broader market, but lower nonwovens volumes (from a low-margin contract exit) and cost inflation drove a $16 million EBITDA decrease year-over-year.
2. Insulation: Q2 2026 sales were $971 million, up 4% year-over-year, accounting for 34.7% of total company revenue. EBITDA was $213 million, with an EBITDA margin of 22%. Strength was driven by higher volumes in North American non-residential and European markets, partially offset by lower pricing and continued inflation.
3. Doors: Q2 2026 sales were $513 million, down 7% year-over-year, accounting for 18.3% of total company revenue. The year-over-year decline was primarily driven by the impact of completed strategic divestitures that removed $30 million of net revenue in the quarter. EBITDA was $57 million, with an EBITDA margin of 11%, which was ahead of prior guidance due to tariff refund impacts. Lower volumes and higher transportation costs drove the year-over-year EBITDA decrease.

• Overall enterprise guidance for Q3 2026: revenue is expected to be in the range of $2.6 billion to $2.7 billion, slightly below the prior year period, with an adjusted EBITDA margin of 20% to 22%. The $40 million net cost impact from Iran conflict-related inflation is incorporated into this guidance.
• Roofing Q3 2026 guidance: revenue is expected to be down mid-to-high single digits year-over-year, with an EBITDA margin of approximately 30%. Volumes are expected to be in line with the broader market, which will see volume pulled forward into Q2 from pre-price-increase stocking, resulting in high single-digit ARMA shipment declines year-over-year; negative price-cost is expected due to ongoing input and transportation inflation.
• Insulation Q3 2026 guidance: mid single-digit revenue growth year-over-year, with an EBITDA margin of 22% in line with Q2. North American non-residential revenue is expected to be up low double digits, while North American residential revenue will be flat year-over-year; overall negative price-cost is expected as inflation offsets slightly positive pricing. The Nephi, Utah plant will be restarted in Q4 2026 to support planned furnace rebuilds over 2026-2027 and serve the West Coast residential market more cost-effectively.
• Doors Q3 2026 guidance: revenue is expected to be down mid-single digits year-over-year (driven by prior divestitures), with an EBITDA margin of approximately 10% in line with the prior year. Negative price-cost is expected despite slightly positive pricing, due to ongoing material and transportation inflation.
• Full year 2026 unchanged guidance: general corporate EBITDA expenses of $245 million to $255 million, effective tax rate of 24% to 26%, depreciation and amortization of approximately $680 million, and total capital additions of approximately $800 million; the company remains committed to returning $1 billion to shareholders in 2026, following the $1 billion returned in 2025.

• Ongoing Iran conflict has driven net cost inflation of $30 million in Q2 2026, with an expected $40 million net impact in Q3 2026 as inflation works through inventory; roofing is the most impacted segment, with continued pressure on transportation, asphalt, and raw material costs.
• Discretionary home remodel activity and new residential construction remain under pressure in the current market, pressuring near-term volume across segments.
• Distributor inventory levels for roofing are currently slightly elevated due to pre-price-increase pull forward in Q2, which will pressure Q3 shipments; Q4 volumes will depend on storm activity and the pace of inventory normalization.
• Ongoing tariffs continue to disproportionately impact the Doors segment, with no near-term expectation of easing.
• Insulation margins are currently pressured by cumulative inflation absorbed over the past several years, while operating at the lower end of the long-term 20% to 27% margin range amid weak housing market activity.

Q: Insulation volume strength came from higher non-residential and European growth, but North American residential also outperformed. What is driving this strength, and what is the timeline and long-term plan for restarting the Nephi, Utah plant? / A: The volume strength is the result of a decade-long organic growth strategy focused on non-residential and European markets, with recent investments positioning the business to capture current growth. Data centers, a fast-growing niche, are adding top-line momentum, and commercial execution is broadly strong across all non-residential and European markets that are gradually recovering. The Nephi plant will restart in Q4 2026 to support planned furnace rebuilds over the next two years, and it allows more cost-effective service to the West Coast residential market with minimal one-time startup costs.

Q: Insulation margins are currently ~200 basis points below the long-term 24% target. What is the path to return to this target over time? / A: Current margins are depressed because the housing market is at the lower end of the 1.2 to 1.6 million housing start range assumed for the long-term target, and cumulative inflation over recent years has created negative price-cost dynamics. Pricing actions currently in the market will help recover absorbed inflation, and the growing mix of higher-margin non-residential and European business will structurally improve margins over time. New, more efficient manufacturing assets will also lower operating costs and drive productivity gains that support margin expansion.

Q: What is the expected realization of recent roofing price increases relative to historical averages, and what is the year-over-year pricing outlook for Q3? / A: The company is seeing very good price realization for both April and June announced price increases, in line with historical averages. While pricing was flat in Q2, realization will continue to build through Q3 and Q4 to offset ongoing cost inflation. Q3 volume is depressed by Q2 pre-price-increase pull forward, so the revenue guidance does not contradict the building upward trend in pricing realization.

Q: There was a nonwovens contract exit that impacted Q2 roofing results. What is the impact of this exit on Q3 guidance, and is roofing still expected to reach price-cost positive by Q4? / A: The nonwovens contract exited at the end of 2025, and the heavy year-over-year volume impact in Q2 2026 will completely phase out in Q3, with no material year-over-year impact going forward. Core shingle and components volume outperformed the market in Q2. Whether roofing reaches price-cost positive by Q4 depends on inflation stability; the company expects price realization to offset inflation if costs stabilize, and is pursuing productivity and sourcing offsets to sustain margins regardless of price-cost dynamics.

Q: What is the impact of remaining pending tariff refunds on Q3 and beyond, and when will inflation and the price-cost dynamic improve? / A: Approximately $20 million in additional tariff refunds are pending, expected to hit calendar year 2026 (spread across Q3 and Q4), but they are not included in guidance and represent modest potential upside. Ongoing Iran-related inflation is still working through inventory, with $40 million of net impact expected in Q3 even if the conflict resolves soon. Price increases are gaining traction across all three businesses, and pricing momentum should improve the price-cost dynamic as inflation works through the system.