Owens Corning downgraded at Barclays after Masonite deal

Owens Corning (NYSE:OC) on Monday was downgraded to Equal Weight from a previous investment rating of Overweight by analysts at financial-services firm Barclays. They said the maker of building materials is riskier announcing last week a plan to buy door-maker Masonite International (DOOR).

“Investors will now need to focus on the integration of a large acquisition while the share repurchase narrative is temporarily put aside, and at a higher level, are likely to question the capital allocation decision,” Matthew Bouley, analyst at Barclays, said in a report on February 12. “On the surface, we think the strategic rationale behind the deal is not immediately clear, while recognizing that management's multi-year track record of strong execution should earn some benefit of the doubt.”

Owens Corning (OC) on February 9 said it had offered $3.9 billion in cash for Masonite (DOOR). The companies expect the deal to close this year.

Barclays lowered its price target to $160 a share from $176 a share, based on an estimated enterprise value that’s 6.4 times earnings before interest, taxes, depreciation and amortization of $2.27 billion for full-year 2024.

The estimated valuation includes year-end net debt of $597 million, and removes pension liability of $167 million and non-controlling interests of $20 million.