Where Will Corning Go Next?

With shares of Corning (NYSE:GLW) trading around $13, 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:

T = Trends for a Stock’s Movement

Corning is a global, technology-based corporation. The company operates in five segments: Display Technologies, Telecommunications, Environmental Technologies, Specialty Materials and Life Sciences. Corning provides the products essential to innovation across various industries. Through its five segments, the company is able to make a positive contribution to growing technologies in expanding economies around the world.

NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

T = Technicals on the Stock Chart are Strong

Corning has been a part of a long-term trading range that has kept its stock valued between $13 and $25 per share, aside from the technology boom and bust. The stock is at the lower end of the range so it may be finding buyers at these prices. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Corning is trading below above its rising key averages which signal bullish price action in the near-term.

GLW

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Corning options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Corning Options

30.48%

93%

90%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

May Options

Flat

Average

June Options

Flat

Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion…

E = Earnings Are Decreasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Corning’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Corning look like and more importantly, how did the markets like these numbers?

2012 Q4

2012 Q3

2012 Q2

2012 Q1

Earnings Growth (Y-O-Y)

-37.50%

-31.37%

-36.17%

-36.17%

Revenue Growth (Y-O-Y)

13.73%

-1.78%

-4.84%

-0.16%

Earnings Reaction

0.65%

-9.39%

-7.7%

7.11%

Corning has mostly seen decreasing earnings and revenue over the last four quarters. From these figures, the markets have been very emotional about Corning’s last four earnings announcements.

NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

P = Poor Relative Performance Versus Peers and Sector

How has Corning stock done relative to its peers, PPG Industries (NYSE:PPG), Thermo Fisher Scientific (NYSE:TMO), TE Connectivity (NYSE:TEL), and sector?

Corning

PPG Industries

Thermo Fisher Scientific

TE Connectivity

Sector

Year-to-Date Return

3.34%

-1.89%

22.60%

9.25%

6.70%

Corning has been an underperformer relative to its peers and sector, year-to-date.

Conclusion

Corning provides products that are essential in growing technologies that are a base for growing economies across the globe. The stock has been a part of a long-term range and is now trading at the low end of it so it may be headed higher. Earnings and revenue has been decreasing over the last four quarters which has resulted in mixed feelings by investors. Relative to its peers and sector, Corning has underperformed year-to-date. WAIT AND SEE what Corning does in the coming quarter.

Using a solid investing framework such as this can help improve your stock-picking skills. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.