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The Market Is Wrong About Owens Corning

Owens Corning’s stock is on sale, Cramer said Monday, as investors have dumped their shares following an earnings miss in the most recent quarter. Their mistake, though, could be your opportunity.

Sure, the company on Aug. 4 announced a profit of 57 cents a share when the Street expected 3 cents more than that, but the stock still didn’t deserve the hit it has taken: down 18% from $31.55 before it reported. Not when Owens Corning’s three business segments—composites, building maters and roofing—are set to see some “serious upside,” Cramer said.

Looking forward, the composites biz is expected to grow 25% this year, the company said at the quarter, with margins, now at 8.5%, returning to double digits within the next 12 months. Plus, this segment gets 65% of its sales from outside the US, including Brazil, China and India, which is key during these tough times for the American economy.

In building materials, where Owens makes insulation and fiber-glass windows that retain heat, Cramer sees a turnaround coming from the weakness—higher costs and poor plant performance—seen in the most recent quarter. These issues should be resolved in the next three to four months, he said, and the whole segment should return to profitability by the second half of 2011, thanks in part to price increases the company pushed through. Cramer also likes the energy-efficiency aspect of this business, as cost saving in this area is a big secular theme right now. And OC’s insulation helps businesses do just that.

The roofing business, meanwhile, earns 75% of revenues from the repair and remodeling market, meaning it’s not dependent on the housing sector. And sales in the most recent segment were up 6% year-over-year. Also, Owens Corning is one of four companies that control 90% of this market, which also allows OC to pass its higher costs along to customers.

Selling for just 9.7 times earnings with a near 30% growth rate expected for 2011? That makes OC incredibly cheap, Cramer said, especially in the face of the potential he just described. He recommended investors get in now before the stock takes off.

Because Owens Corning “is ready to fly,” Cramer said.

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the Mad Money website? madcap@cnbc.com

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