UPDATE 2-Owens Corning Q2 profit tops Street; sees tough H2

* Q2 adj EPS $0.49 vs est $0.07

* Revenue falls 23 pct

* Sees weak housing mkt hurting building materials demand

* Shares up 10 pct (Recasts; Adds analyst comment, updates share movement)

By Bhaswati Mukhopadhyay

BANGALORE, Aug 5 (Reuters) - Building materials maker Owens Corning (OC.N) reported second-quarter profit that handily beat market estimates as its roofing business benefitted from lower raw material costs, and its shares rose 10 percent.

"They (Owens Corning) got price increases as asphalt prices increased last year and now that asphalt cost has come down, they have been able to maintain prices at overrated levels," said analyst Garik Shmois of Longbow Research.

Margins on roofing, therefore, improved as input costs pulled back, Shmois added.

Within the roofing business, the company makes and sells residential roofing shingles and oxidized asphalt materials used in residential and commercial construction.

The company said sales at roofing, where selling prices have been stable since the beginning of the fourth quarter of 2008, rose 14 percent in the second quarter.

However, Owens Corning said it started to see asphalt prices go up in the second quarter.

Analyst Keith Hughes of SunTrust Robinson Humphrey said damages from hurricanes and hailstorms in 2008, particularly in Texas and southeast United States, drove the roofing business.

However, he said, Owens Corning's businesses that serve non-residential construction and renovation will be worse in the second half than in the first.

"Non-residential construction and renovation have still not found a bottom," Hughes added.

The company said it expects the business environment to remain tough through the second half of 2009.

It also said continued weakness in the U.S. housing industry is expected to hurt demand in its building materials segment through the rest of 2009.

"Roofing demand from storm damage has a limited life and we are going to see difficult comparisons in the third quarter," said SunTrust's Hughes, who has a "neutral" rating on the stock.

The housing market, however, may be starting to recover slightly from its slump.New U.S. housing starts and permits jumped in June, propelled by a rise in ground-breaking for single-family homes, a government report showed. [ID:nN17472008]

For the second quarter, net income fell to $33 million, or 26 cents a share, from $41 million, or 32 cents a share, a year ago. On an adjusted basis, the company earned 49 cents a share.

Revenue fell 23 percent to $1.22 billion. The company said its insulation business continues to be impacted by the weak North American housing market.

Analysts on average were expecting earnings of 7 cents a share, before special items, on revenue of $1.34 billion, according to Reuters Estimates. Capacity will remain curtailed, costs and capital spending will be lower compared with 2008, the company said in a statement.

Shares of the Toledo, Ohio-based company were up $2.23 at $21.47 in late afternoon trade on the New York Stock Exchange. They earlier touched a high of $21.93. (Editing by Aradhana Aravindan)