Stock of the Day

October 12, 2020

Corning (GLW)

$51.29
+$0.43 (+0.9%)
Market Cap: $43.81B

About Corning

Corning Incorporated engages in the display technologies, optical communications, environmental technologies, specialty materials, and life sciences businesses in the United States and internationally. The company's Display Technologies segment offers glass substrates for flat panel displays, including liquid crystal displays and organic light-emitting diodes that are used in televisions, notebook computers, desktop monitors, tablets, and handheld devices. Its Optical Communications segment provides optical fibers and cables; and hardware and equipment products, such as cable assemblies, fiber optic hardware and connectors, optical components and couplers, closures, network interface devices, and other accessories for the telecommunications industry, businesses, governments, and individuals. The company's Specialty Materials segment manufactures products that offer material formulations for glass, glass ceramics, crystals, precision metrology instruments, and software, as well as glass wafers and substrates, tinted sunglasses, and radiation shielding products for various markets comprising mobile consumer electronics, semiconductor equipment optics and consumables, aerospace and defense optics, radiation shielding products, sunglasses, and telecommunications components. Its Environmental Technologies segment provides ceramic substrates and filter products for emissions control in mobile, gasoline, and diesel applications. The company's Life Sciences segment offers laboratory products, including consumables, such as plastic vessels, liquid handling plastics, specialty surfaces, cell culture media, and serum, as well as general labware, and glassware and equipment under the Corning, Pyrex, Falcon, and Axygen brands. The company was formerly known as Corning Glass Works and changed its name to Corning Incorporated in April 1989. Corning Incorporated was founded in 1851 and is headquartered in Corning, New York.

Corning Bull Case

Here are some ways that investors could benefit from investing in Corning Incorporated:

  • The current stock price is around $49.55, which may present a buying opportunity for investors looking for value in the technology sector.
  • Corning Incorporated recently reported a quarterly earnings per share (EPS) of $0.54, exceeding analysts' expectations, indicating strong financial performance.
  • The company has a solid revenue growth of 12.9% year-over-year, showcasing its ability to expand and adapt in a competitive market.
  • Corning Incorporated has a diverse portfolio, engaging in various sectors such as display technologies and optical communications, which can mitigate risks associated with market fluctuations.
  • The company offers a dividend of $0.28 per share, providing a yield of approximately 2.21%, which can be attractive for income-focused investors.

Corning Bear Case

Investors should be bearish about investing in Corning Incorporated for these reasons:

  • The dividend payout ratio is currently at 215.38%, which suggests that the company is paying out more in dividends than it earns, raising concerns about sustainability.
  • Recent insider selling, with significant shares sold by executives, may indicate a lack of confidence in the company's future performance.
  • Corning's stock has experienced fluctuations, with a 52-week high of $55.33 and a low of $36.58, reflecting potential volatility that could deter risk-averse investors.
  • Analysts have varied opinions on the stock, with some lowering their price targets, which could signal uncertainty about future growth prospects.
  • The company has a high price-to-earnings (P/E) ratio of 85.43, suggesting that the stock may be overvalued compared to its earnings, which could be a red flag for potential investors.

Innovation Will Push Corning (NYSE: GLW) to New Heights

Written By Nick Vasco on 9/23/2020

Innovation Will Push Corning (NYSE: GLW) to New HeightsCorning (NYSE: GLW) recently raised its Q3 guidance, making it clear that its innovation will spearhead outperformance – even in a tough market.

Here’s what CFO Tony Tripeny said in the release:

“I’m pleased to share that the positive momentum seen in July has continued, and we expect third-quarter sequential sales growth in the low teens, higher than the current consensus estimate of high-single digits. We’re delivering for our customers, outperforming our markets, and preserving our financial strength. Looking ahead, our underlying growth drivers are intact."

Corning’s Q2 beat expectations, but sales were down 13% yoy and net income dipped 47% yoy.

It’s not what you want to see, but once industry conditions inevitably improve, Corning will return to growth.

Here are three reasons why:

1. Gorilla Glass is Teflon

It’s been a tough year for the global smartphone market. Sales have improved after being down 50% yoy in April, but were still down 24% yoy in Q2, according to Counterpoint. That was the fastest ever rate of decline for the market.

Corning’s Gorilla Glass has been used on more than 8 billion devices worldwide, so you would expect a similar decline for its Q2 sales in the Specialty Materials segment. But that wasn’t the case, as the segment saw 13% yoy revenue growth.

Despite the impressive relative success, Corning isn’t resting on its laurels:

The company just launched Gorilla Glass Victus; according to Corning, it “features significantly better drop and scratch performance than any other Gorilla Glass or competitive glass from other manufacturers.” Samsung has already agreed to start using the new glass in its products.

The smartphone market is going to grow post-pandemic. Corning’s current outperformance and innovation indicate that it will see nice growth when that happens.

2. Gasoline Particulate Filters Drove Auto Outperformance

Global auto production saw a huge decline in Q2, dipping 45% yoy. Corning’s auto sales, on the other hand, saw a decline of 31% yoy. Not great, but again, it’s outperformance.

Corning’s gasoline particulate filters led the way, with sales growing 20% yoy. With emissions control being such a hot initiative by governments across the world, this segment can easily see double-digit growth for many years to come.

But what about new car sales? They have been low and may continue to track below pre-pandemic levels for a while. Corning doesn’t benefit from the surging used car market, after all.

It might be unrealistic to expect growth in new car sales anytime soon. But even if that 45% decline turns into a 10-20% dip, Corning would enjoy a lot of upside from where we are now. Especially considering its recent outperformance.

3. Corning is Getting into the Vaccine Game

You probably don’t think of a glass company when you think of COVID-19 vaccine efforts, but Corning’s Valor Glass innovation may play a crucial role in the administration of the eventual vaccine.

The glass helps “enable faster filling line speeds and increase patient safety.” Valor Glass vials are up to 10 times stronger than traditional vials.

The U.S. government is a believer in Valor Glass and has put its money where its mouth is, awarding Corning with $204 million to expand its Valor manufacturing capability. The government has shown little restraint in spending money to combat the virus, and now Corning becomes yet another private sector beneficiary.

And the Valor glass use cases go beyond COVID-19 vaccines, with Corning reaching an agreement with Pfizer (NYSE: PFE) to provide Valor Glass for other drugs.

The Verdict

I liked the valuation on Corning two months ago. With shares trading only slightly higher now, and the company’s outlook improving over the past couple of months, I like it even more now.

Innovation Will Push Corning (NYSE: GLW) to New Heights

Shares are in a solid up-trend right now, so you may be able to achieve sold returns on a Corning investment in 2020.

But as I said back in July, the real upside with Corning is in 2021 and beyond. Consider a buy-and-hold play on Corning; it could pay off nicely over the next few years as industry conditions improve and Corning’s innovations are able to reach their full potential.

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