Where Will Corning Go Post-Earnings?

With shares of Corning (NYSE:GLW) trading around $17, 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 produces and sells specialty glasses, ceramics, and related materials worldwide. It operates in five segments: Display Technologies, Telecommunications, Environmental Technologies, Specialty Materials, and Life Sciences. Corning has launched Corning Lotus Glass, an environmentally friendly display glass for organic LED and LCD displays that are used in portable devices such as smartphones, tablets, and notebook computers. Smart phones, tablets, notebook computers, and their related materials are seeing explosive growth in developed and developing countries around the world.

Corning on Tuesday announced its results for the fourth quarter and full year of 2013. Core earnings per share were 29 cents, an increase of 4 percent over last year’s fourth quarter and better than expected. GAAP earnings per share were 30 cents. Core sales were $2 billion, a 2 percent decline from the comparable period last year.“2013 was a very successful year for Corning,” Wendell P. Weeks, chairman, chief executive officer, and president, said in the earnings report. “We achieved the company’s primary performance goal of restoring earnings growth. This was accomplished by regaining positive momentum in our LCD business and growing the earnings in our other segments. We also delivered on our commitment to enhance shareholder value by increasing the cash dividend and executing more than $1.5 billion in share repurchases. The company’s performance was recognized by a 41% improvement in the year’s share price, a result with which we are delighted.”

T = Technicals on the Stock Chart Are Mixed

Corning stock has struggled to make significant progress over the last couple of years. The stock is currently pulling back and may need time to stabilize before heading higher. 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 between its rising key averages, which signals neutral 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

31.17%

23%

21%

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

Put IV Skew

Call IV Skew

February Options

Average

Average

March Options

Average

Average

As of Tuesday, there is average demand from call and put buyers or sellers, all neutral over the next two months. To summarize, investors are buying a minimal amount of call and put option contracts and are leaning neutral 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 Mixed 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?

2013 Q4

2013 Q3

2013 Q2

2013 Q1

Earnings Growth (Y-O-Y)

3.57%

18%

38.71%

6.45%

Revenue Growth (Y-O-Y)

-1.96%

10%

3.88%

-5.52%

Earnings Reaction

-4.72%*

-2.92%

-1.29%

5.48%

*As of this writing.

Corning has seen increasing earnings and mixed revenue figures over the last four quarters. From these numbers, the markets have been pleased with Corning’s recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has Corning stock done relative to its peers – PPG Industries (NYSE:PPG), Dow Chemical (NYSE:DOW), and Optical Cable (NASDAQ:OCC) — and sector?

Corning

PPG Industries

Dow Chemical

Optical Cable

Sector

Year-to-Date Return

-2.53%

-3.46%

-2.82%

6.81%

-1.5%

Corning has been a relative performance leader, year to date.

Conclusion

Corning provides essential products used in the production process of smartphones, notebooks, tablets, and other related products to companies and consumers around the world. The company reported fourth-quarter earnings that left investors happy. The stock hasn’t made significant progress over the last couple of years and is currently pulling back. Over the last four quarters, earnings have increased and revenue figures have been mixed, which has left investors pleased with the company. Relative to its peers and sector, Corning has been a relative year-to-date performance leader. WAIT AND SEE what Corning does the rest of the 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.

More from Wall St. Cheat Sheet:

More from The Cheat Sheet