Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Why USG Corporation Stock Got Built Up Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of USG Corporation (NYSE: USG  ) broke through a wall today, rising as much as 4.3% and hitting a new 52-week high following much better than expected results from Owens Corning (NYSE: OC  ) .

So what: As the largest distributor of wallboard and manufacturer of gypsum products in the United States, any positive news from related companies such as Owens Corning bodes well for USG. Owens Corning makes and sells fiberglass insulation and roofing-related products which tend to have similar demand curves

Owens Corning's adjusted earnings per share quadrupled from $0.11 to $0.44 in the fourth quarter on a sales increase of 10.3%, in part due to improved pricing. CEO Mike Thaman credited the success with "benefiting from a stable and growing global economy and a recovering U.S. housing market." He expects more growth in 2014.

Now what: Similar to Owens Corning's 10.3% sales gains with 300% earnings gains, USG's earnings tend to rise much faster than its sales. As volumes of demand for wallboard improves by relatively small amounts, the market prices that USG realizes tend to skyrocket. All other things being equal, for every $1.00 increase in the price of wallboard is $1.00 that tends to the bottom line (pre-tax).

If Owns Corning's outlook proves to be correct, look for wallboard prices to continue to escalate and USG's earnings to potentially explode. Last year was the first time USG reported full-year net income since 2007, right before the housing collapse. Don't be surprised to see analysts raise their per-share guidance for full-year-2014 earnings.

Analysts currently expect a 158% rise in earnings per share for this year, which are currently at $1.73 compared to $0.67 last year. USG has a forward P/E under 20, even less if analysts raise estimates -- this looks cheap when considering realized and further expected earnings growth. However, Fools need to be cautious for the long term; the pendulum swings both ways. Whenever residential and commercial construction activity starts to get even mildly weak, wallboard prices usually crash as fast, or faster, than they went up.

Be prepared for the next housing crash
Many investors are terrified about investing in big banking stocks after the crash, but the sector has one notable stand-out. In a sea of mismanaged and dangerous peers, it rises above as "The Only Big Bank Built to Last." You can uncover the top pick that Warren Buffett loves in The Motley Fool's new report. It's free, so click here to access it now.

Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2836864, ~/Articles/ArticleHandler.aspx, 8/31/2015 6:13:24 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Nickey Friedman

Nickey is a select freelancer for the Fool. She writes about food & beverage, dry bulk shipping, and whatever else floats her boat. After selling four successful restaurants, she turned in her knives for a pen and now puts her passion for food, hospitality, and transportation in writing. You can send email to her at

Today's Market

updated Moments ago Sponsored by:
DOW 16,528.03 -114.98 -0.69%
S&P 500 1,972.18 -16.69 -0.84%
NASD 4,776.51 -51.82 -1.07%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/31/2015 4:07 PM
USG $30.51 Up +0.18 +0.59%
USG CAPS Rating: ****
OC $44.29 Up +0.26 +0.59%
Owens Corning CAPS Rating: ***