Is Corning a Comeback in Waiting? Is the Stock (GLW) a Buy or Sell in 2013?

Since March 2011, Corning stock (GLW) has been on a 45% decline. In January of 2013, Corning reported Q4 sales figures of $2.15 billion, a 14% increase from Q4-2011 numbers – the largest quarterly sales increase in Corning history. Due to a lot of factors, however, investors do not seem very excited about Corning stock and are questioning whether Corning stock (GLW) is a good Buy, Sell or Hold? Will GLW stock rise again, after falling 45% in two years?

GLW - 2 Year Price Decline
GLW 2 Year Chart: Yahoo Finance

A couple of days ago, reiterated their Hold ratings (Ratings score of C+) on GLW, stating that “the company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position and attractive valuation levels.” However, as a counter to these strengths they also highlighted weaknesses “including deteriorating net income, disappointing return on equity and a generally disappointing performance in the stock itself.”

Taking GLW’s shaky prospects, rapidly changing industry and new product introductions, this research report will attempt to answer whether Corning stock is good Buy, Sell, Hold or Short in 2013.

Corning Inc. (GLW) Company Analysis and Research Report

  1. Fundamental Analysis
  2. Valuation Overview
  3. Stock Analysts’ Recommendations
  4. Looking Forward
  5. Bottom Line Conclusion
  1. Fundamental Analysis

Corning is a major player in the specialty glass and ceramics industry. It manufactures, produces and sells glass substrates used to produce LCDs (Liquid Crystal Displays). LCDs are used in a vast range of consumer products such as mobile and electronic devices, etc. The firm is also involved in telecommunications and provides bandwidth and telecommunications network solutions.

Corning has three main products in the design or production phase that serve as current or future expected drivers of the firm’s revenue: Willow Glass (thin and flexible glass substrates for ultra-slim displays), Eagle XG Slim, and Lotus Glass (advanced glass for high performance displays).

The firm’s reportable segments are as follows:

  • Telecommunications – manufactures optical fiber and other equipment components for the telecom industry.
  • Environmental Technologies – manufactures ceramic substrates and filters for automotive and diesel applications.
  • Specialty Materials – manufactures products that provide more than 150 material formulations for glass, glass ceramics and fluoride crystals
  • Life Sciences – manufactures glass and plastic labware and other equipment to provide workflow solutions for scientific applications.

On February 13, 2013, Corning filed its Form 10-K (Annual Report for Full Year 2012). Looking at the below screenshot of GLW’s consolidated income statement, two conflicting trends immediately jump out at you.

  1. Trend 1 (Increasing Net Sales)
    The first trend is on the Net Sales row (highlighted with a red dotted border). We see that net sales have been increasing year over year. From 2010 to 2011, sales increased by 18.96%: (7,890-6,632)/6,632. From 2011 to 2012, sales did increase (by 1.54%), but this was much less than the 18.96% increase from the previous period. The overall increase in the firm’s net sales supports the viewpoint that Corning (GLW) stock could be a buy or a hold in 2013.
  1. Trend 2 (Declining Net Income)
    The second trend is on the Net Income row (also highlighted with a red dotted border). We see here that net income (net sales minus all costs and taxes) has been on a steady decline. In 2010, net income was $3.5 billion. That number fell to $2.8 billion in 2011, a -21% decline. In 2012, GLW reported $1.7 billion in net income, a -38% plunge. This continual decline in net income definitely supports those who argue that GLW is a sell or a short in 2013.

GLW Consolidated Statement of Income (Is GLW a buy, sell or hold)

  1. Valuation Overview

When determining the value of a stock, investors normally consider some distinct variables in their valuation analysis. These include a firm's financial margins, management effectiveness, growth rates, return on investments and other valuation matrix (EPS, P/E, Debt Ratio, etc.).

For the last twelve months (trailing twelve months: ttm), GLW experienced a negative EPS Growth of -35.24%. At the same time, however, the industry (Electronic Equipment, Instruments & Components industry) as a whole experienced a 70.65% average increase in EPS growth. Corning’s underperformance of the industry and declining earnings growth is a major factor contributing to its declining stock price. In addition, the industry had an average revenue growth (ttm) of 3.21%, while GLW only showed a 1.55% growth in revenue, once again underperforming the industry in which it does business.

GLW has a Return on Equity (ROE) of 8.10%, and shows a positive Return on Assets (ROA) of 3.26%. ROE and ROA are variables used by investors to determine management effectiveness. For each $1 of equity, GLW’s management is earning $0.081 and for each $1 of asset, management is earning a return of $0.0326. Compared to the industry, however, Corning is below average in management’s ability to manage the firm’s resources. The industry has an average ROE (ttm) of 10.79%, while the industry’s average ROA (ttm) comes in at 4.58%

GLW Management Effectiveness - Will GLW Stock Rise Again

GLW pays an annual dividend rate of $0.36 and, at its current price, shows a forward annual dividend yield of 2.80%, which is greater than the industry average of 1.06% dividend yield. Additionally, few companies in the industry presently pay a dividend.

GLW Dividend Table

  1. Analysts’ Recommendations on the Stock

Stock analysts consider GLW a Moderate Buy. Between a 1 (Strong Buy) and a 5 (Strong Sell), they rated the stock a 2.09. 

Corning – Analysts’ Consensus Ratings
Corning - Stock Analysts Recommendation Consensus

GLW – Analysts’ Recommendations
GLW Analyst Recommendation - Buy, Sell or Hold

  1. Looking Forward

Regarding the future prospect facing GLW, James Flaws, Corning’s CFO stated the following:

“We are not without challenges in 2013 as we continue to face an uncertain global economy, but we enter the year with prospects for growth in Specialty Materials, Telecommunications, Environmental Technologies and Life Sciences. In our LCD glass business, we expect our market share to be stable, and price declines to be moderate.”


  • Display Technologies Segment: GLW expects Q1 total glass volume to increase on a year-over-year basis, but to decline sequentially by mid-single digits.
  • Telecommunications Segment: Q1 sales are expected to increase on a year-over-year basis. A rise in demand for Corning’s optical fiber and cable, combined with growth of fiber-to-the-home sales in Australia, and enterprise networks solutions, should bring about a strong year for the company’s Telecommunications segment.
  • Specialty Materials Segment: Sales are expected to decline in the first quarter, which is typically the lowest quarter of the year for this business. For the full year, the company is anticipating double-digit market growth for Gorilla Glass, driven by its continued popularity as a cover glass for smartphones and tablets, and the emergence of touch technology on notebook computers.
  1. Bottom Line Conclusion

Taking the various fundamental, valuation and other analyses into consideration, MarketConsensus Stock Analysis Team rates GLW as a HOLD. We do not see much justification for a higher rating for the stock at this time. However, we will continue monitoring the firm’s financial prospect and a major improvement in the firm’s bottom line figures (net income) will warrant a change from HOLD to moderate BUY.

Good luck in your investing,

MarketConsensus Stock Analysis Team

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