Is Corning Durable?

With shares of Corning (NYSE:GLW) trading at around $12.63, is GLW an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

smartphoneThe big news for Corning is Gorilla Glass 3, which is expected to be released at the International Consumer Electronics Show in Las Vegas next week. However, we don’t need to wait for it to be released to know the details. Gorilla Glass 3 will be more durable and thinner than previous generations. The glass will be 50 percent stronger than Gorilla Glass 2, which is saying a lot. Gorilla Glass 3 will also possess enhanced scratch resistance and reduced scratch visibility.

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At the current time, the vast majority of Corning’s net income comes from HDTVs. The reason Gorilla Glass 3 is important, and might act as a catalyst, is because Corning is continuously growing in the mobile market. To date, Corning’s display screens have been featured in over 1 billion devices. Amazingly, that number is likely to grow. Corning should benefit most from smartphone growth. Also be on the lookout for Willow Glass in the future, which will be as thin as a sheet of paper.

Let’s take a look at some important numbers for Corning.

E = Equity to Debt Ratio Is Strong

The debt-to-equity ratio and balance sheet for Corning are strong.

Debt-To-Equity

Cash

Long-Term Debt

GLW

0.16

$6.35 Billion

$3.40 Billion

TEL

0.47

$1.59 Billion

$3.71 Billion

MOLX

0.90

$702.08 Million

$225.07 Million

 

T = Technicals on the Stock Chart Are Mixed

Corning hasn’t performed well over the past few years, and it has been outperformed by TE Connectivity (NYSE:TEL) and Molex Incorporated (NASDAQ:MOLX). However, if odds were being drawn up for the next three years, Corning would be the favorite.

1 Month

Year-To-Date

1 Year

3 Year

GLW

0.80%

0.16%

-4.03%

-32.05%

TEL

3.59%

0.16%

16.92%

57.88%

MOLX

4.89%

3.62%

17.99%

42.00%

 

At $12.63, Corning is currently trading above its 50-day and 100-day SMA, and slightly below its 200-day SMA.

50-Day SMA

12.13

100-Day SMA

12.36

200-Day SMA

12.67

 

E = Earnings Have Been Inconsistent

2010 was a good year for Corning, and it looked as though business would continue to improve. However, 2011 was a disappointment. While everyone was down on the company at that time, revenue still grew at a solid pace. As long as there is revenue growth, there is potential for EPS growth. The point here is that 2011 shouldn’t be looked at as a complete failure. If anything, it might have been a necessary setup for the future.

2007

2008

2009

2010

2011

Revenue ($)in billions

5.86

5.95

5.40

6.63

7.89

Diluted EPS ($)

1.34

3.32

1.28

2.25

1.77

 

When we look at last quarter on a YoY basis, we see a decrease in revenue and earnings. However, this shouldn’t be cause for concern.

9/2011

12/2012

3/2012

6/2012

9/2012

Revenue ($)in billions

2.08

1.89

1.92

1.91

2.04

Diluted EPS ($)

0.51

0.32

0.30

0.30

0.35

T = Trends Support the Industry

There will likely be growth in the HDTV area, but we already know what Corning is capable of in that area. Smartphones and tablets present a tremendous opportunity for Corning, especially on a global scale. In this regard, Corning has lined up all its ducks in a row.

Conclusion

Corning has everything an investor wants to see, including quality debt management, revenue growth, high margins, plenty of cash flow, and exposure in new areas. Corning also has a Trailing P/E of 10.04 and a Forward P/E of 9.50.

Corning is an OUTPERFORM.

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