Corning Sees Growth In Glass

3/28/2011


  Recent Price
$21
  Dividend
$0.20
  Yield
1.0%
  P/E Ratio
10
  Shares (millions)
1,584
  52-Week Price Range
$23.43 - $15.45

Corning ($21; GLW) makes glass components found in personal computers and televisions. It also manufactures fiber optics for the global telecommunications industry. Corning's best growth engine may be one of its smaller units, which sells the increasingly popular Gorilla glass.

Last year, revenue surged 23% to $6.63 billion, the highest level in a decade. That growth, coupled with fatter operating profit margins, helped free cash flow nearly triple to a record $2.52 billion. Management targets 2014 sales of $10 billion through geographic expansion, organic growth, and possibly acquisitions, particularly for its life-sciences and telecommunications units. By then, revenue from China alone is expected to jump at least 150% to more than $2 billion. Corning, yielding 1.0%, is a Buy and a Long-Term Buy.

Business breakdown

Corning's display-technologies business (45% of 2010 revenue, 94% of net income) reported 25% higher volume for liquid-crystal display (LCD) glass in 2010, offsetting 8% lower pricing. The company expects LCD glass volumes to rise 14% to 21% in 2011. Corning's LCD-glass plants located in Japan apparently escaped supply disruptions caused by the disaster. Japan accounted for 11% of Corning's revenue last year.

The telecommunications unit (26%, 3%) produces fiber-optic hardware and components. The company expects demand for optical fiber and network products, along with entry into new markets such as Australia, to accelerate the unit's revenue growth to 15% this year.

Environmental technologies (12%, 1%) supplies engine filters to an automobile industry facing tighter emissions standards in the U.S. and Europe. Sales jumped 38% last year, lifted by automotive demand. Corning sees 10% higher sales in 2011 as demand for diesel products rises.

Specialty materials (9%, no profits yet) includes Corning's popular Gorilla glass. Sales of the thin, tough, scratch-resistant material tripled in 2010. Makers of smartphones, tablet computers, televisions, and personal computers already use Gorilla glass. Corning envisions Gorilla eventually reaching the automotive, appliance, and architectural markets.

Conclusion

Corning's cash holdings swelled 77% last year to $6.35 billion, enough to pay off long-term debt nearly three times over. Capital expenditures could reach $2.7 billion this year, versus $1.0 billion in 2010. Corning will funnel about half of that spending into display technologies. An $800 million plant in China should come online in 2012.

Despite projecting a 17% increase in revenue, Wall Street sees 2011 profits slipping 2% to $2.02 per share. But the stock seems attractively valued at 10 times estimated 2011 earnings — 32% below the average electronic-components stock in the S&P 1500 Index. And at 10 times trailing earnings, Corning sports a 32% discount to its own five-year median P/E of 15. At 15 times the 2012 consensus of $2.20 per share, the stock would sell at $33. An annual report for Corning Inc. is available at One Riverfront Plaza, Corning, NY 14831; (888) 267-6464; www.corning.com.

 

Corning
Quarter
Per-Share Earnings*
($)
Sales
Change
Quarterly
Price Range
($)
P/E Ratio
Range
Dec '10
0.46
vs.
0.44
+ 15%
19.69
-
17.15
10 - 8
Sep '10
0.51
vs.
0.42
+8%
19.39
-
15.45
10 - 8
Jun '10
0.58
vs.
0.39
+23%
21.10
-
15.51
12 - 9
Mar '10
0.52
vs.
0.10
+ 57%
20.85
-
16.75
15 - 12
Year
(Dec.)
Sales
 ($Bil.)
Per-Share
Earnings*
($)
Per-Share
Dividend
($)
52-Week
Price Range
($)
P/E Ratio
Range
2010
6.63
2.07
0.20
21.10
-
15.45
10 - 7
2009
5.40
1.35
0.20
19.55
-
8.97
14 - 7
2008
5.95
1.53
0.20
28.07
-
7.36
18 - 5
2007
5.86
1.41
0.10
27.25
-
18.12
19 - 13
 
Quadrix Scores †
Overall
Momen-
tum
Value
Quality
Financial
Strength
Earnings
Estimates
Performance
97
83
85
94
89
42
60

   * Earnings exclude special items.
   † Quadrix® scores are percentile ranks, with 100 the best.


Current Hotline

Stock Spotlight

Individual Stock Reports

ISRs make stock research easy!

Perhaps the most valuable two page reports available anywhere.

All the data you would normally have to plow through years of 10-K filings, earnings reports, and reams of market data to assemble — yours all in one concise report.

ISRs contain our proprietary Quadrix scores — find out how we rate all the stocks in the S&P 500.

Visit us at individualstockreports.com