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Corning (NYSE:GLW) has been a laggard in my portfolio in 2012. Despite cheap valuations, a strong dividend yield and a growing franchise (Gorilla Glass), the stock has meandered in a relatively tight range of $11 to $14.50 a share all year. However, the stock recently popped above $12 on some positive guidance and these cheap shares look poised to power higher in 2013. I will be adding to my position if we get a sell-off triggered by the fiscal cliff, which I believe is likely.

Key recent positives for Corning:

  • It revised LCD glass demand guidance up to mid-single digits from previously saying they would be flat or up slightly in Q4.
  • More importantly, it stated its specialty materials division driven by Gorilla Glass, will grow sales by 5% Q/Q. It expects 60% Y/Y growth in this segment for Q4 now.
  • Two core products that are driving this impressive growth. Google (NASDAQ:GOOG) uses Corning's Gorilla Glass product for its Nexus line of products. It Nexus 4 smartphone line is especially experiencing robust sales and its Nexus 10 tablet also is selling well. In addition, iPhone5 is selling in record volumes and Citi just came out to say it expects Apple (NASDAQ:AAPL) to have a solid Q1 as it has addressed the supply problems that existing at launch. Gorilla Glass should hit $1B in sales for 2012 or around 13% of overall revenues. This fast growing segment will be a core driver of Corning's profit and stock price in 2013.
  • Consensus earnings estimates for both FY2012 and FY2013 have ticked up two cents a share each over the last week.
  • Analysts expect revenue growth to accelerate to 7% for FY2013 after being basically flat in FY2012.
  • Topeka Capital recently upgraded the shares to a Buy.

Corning Incorporated produces specialty glasses, ceramics, and related materials worldwide. The company operates in five segments: Display Technologies, Telecommunications, Environmental Technologies, Specialty Materials, and Life Sciences.

4 additional reasons GLW is undervalued at $12 a share:

  1. GLW yields 3% and has increased its dividend at better than a 9% annual clip over the last half decade.
  2. The company has a very solid balance sheet with approximately $2 a share in net cash on the books. It also has an open $1.5B share authorization program that would remove around 8% of the total stock float at the current price.
  3. The stock is cheap at 9x forward earnings and has a low five year projected PEG (.80) for a 3% yielder. It also sells for just 83% of book value.
  4. The 22 analysts that cover the stock have a $15 median price target on GLW.
Source: Gorilla Glass And Corning Successfully Riding Coattails Of Apple And Google