The materials and technology company Corning
In recent times, investors have been worried about Corning. The company's stock reached a fifteen-year high above $25 in February 2015 due to strong earnings, a relatively weak dollar, and overall US stock market trends. After that, the stock traded sideways, experienced a couple of 52-week lows, and entered an uptrend that culminated with a 52-week high of $24.14 on October 24, 2016. But then Corning released its third quarter earnings report on the morning of October 25.
That day Corning's stock fell 92 cents, or 3.85%. The stock price recovered some in subsequent days, but it remains below the 52-week high as of Friday's close. However, Corning's earnings results were mostly positive. Its revenue was up 10.3% year-over-year to $2.507 billion, slightly under estimates of $2.52 billion. Its net income was up 34% to $284 million. Most importantly, Corning beat estimates of core earnings per share of 38 cents by posting 42 cents.
So it is arguable that investors have overreacted and oversold Corning stock. Based on earnings alone, there was little reason to sell. Corning's guidance was also confident, with CEO Wendell Weeks highlighting the company's momentum and growth in sales and earnings. Perhaps Corning fell victim to the general stock market dip in late October and early November from anxiety about the US presidential election. But the election correction will likely soon pass, and a weaker dollar will help Corning's profits as an exporter.
On a fundamental level, Corning stock is sound, and remains a value play. According to Morningstar, it has a price to earnings ratio of 11.3 and price to book ratio of 1.4. Revenue has grown 4.4% over a three year average, and net margin TTM is an excellent 24.6%. The stock currently yields 2.41%. Its debt to equity ratio is a healthy 0.3. Finally, Corning had free cash flow of $1.56 billion at the end of 2015.
Although Corning stock has encountered some technical troubles recently, a fundamental analysis reveals a more hopeful story and growth opportunities. Corning remains committed to a plan announced in June to deliver $12.5 billion to shareholders through dividends and repurchases by 2019. It has paid steadily increasing dividends since 2007. It will invest $10 billion in research, development, and engineering through 2019. Demand for glass, substrates, and related products and technologies will continue to strengthen as the world economy becomes more globalized and interconnected. Corning will keep innovating and returning value to shareholders.
The author holds a long position in GLW.
