A Bright Morning for Corning - Barron's

The market for flat-panel TVs is looking surprisingly strong. Barron's Sandra Ward says Corning (GLW), which supplies the glass for more than half of the LCD market, could see its shares climb another 50% on top of the 100%+ gains the company has already seen from its November low.

Sales of LCD flat-panel televisions have stayed healthy despite the global economic downturn. February sales rose 39% Y/Y in the U.S. and 30% in Japan. In January, sales rose 49% in Europe and a whopping 109% in China. Higher demand along with decreased glass inventories could bring Corning a windfall. The company expects to post a Q1 profit now vs. a previous break-even forecast.

Around 90% of Corning's net income comes from the supply of glass to the LCD market. The company says glass orders are up at both its wholly owned business as well as its Samsung Corning Precision Glass joint venture. Despite an expected fall in global TV sales this year, Corning expects LCD TV sales to rise around 9%.

More good news comes from Corning's improving utilization trends at its factories in Asia. Also, two important Corning customers are expanding their LCD panel capacity to meet higher Chinese demand.

Investors should note that shares are up around 60% from the start of the year, and over 100% from the company's November low, so shares are susceptible to profit-taking. Price wars are always a threat and the company's other businesses are under pressure from the economic slowdown. But management has acted defensively, adjusting compensation, lowering capital expenditures, and eliminating positions, among other moves. Corning has $2.8B in cash and debt of around $1.6B, and expects to end the year with a positive cash flow.

• Jeff Evenson, of Sanford C. Bernstein, expects Corning to see a rapid acceleration in orders and profits in Q2 and Q3. Last week, he raised his 2009 earnings estimate to $0.94/share from $0.65. His 2010 estimate is unchanged at $1.11.
• Connor Browne, of Thornburg Investment Management, expects Corning's long-term earnings to reach a run rate of $1.50/share annually. With a normalized multiple of 15, that would value the stock at $22.50 vs. Friday's $15.96.

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• Corning: Sees 2009 sales of $5B vs. consensus of $4.7B. GLW will spend $630M on R&D in 2009, and expects "significant improvement in LCD glass demand in the second quarter, leading to stronger demand in the second half of this year." Short of which, it is ready to cut costs again. (PR)
• In March, Citigroup upgraded Corning to Buy from Hold, and raised its price target to $16 from $11.25.

Comments

[investor88:]

Good article, long Corning [GLW] especially noteworthy it is also in net cash. Technicals look positive. Since 90% of its income is from supply of glass to the LCD market, we just have to follow the positive trends in this single market.

Apr 05 07:48 AM

[Marcap:]

Great Article! Corning is indeed a very solid company with a great balance sheet, trading at a very attractive P/E ratio of less than 5:1. And of course at 50%, Corning already has a huge market share in LCD panels, a market share which I believe will only increase in the coming years as some competitors go under. But having said that, I am not sure that will equate to more revenue for Corning.

The reality is that LCD prices are continuing to drop like a brick in a swimming pool as market saturation increases. Therefore even a market share increase of 25% of a market that shrinks by 50% is still a decrease of 25% in total revenues.

Apr 05 10:56 AM

[iclarius:]

Nice to see the positive outlook on GLW with respect to its LCD Glass market but I see an up and coming aspect of GLW in its fiber optic section. Their bendable fiber will allow the telephone companies, like Verzion, to compete with cable companies in the inner cities and existing high rise buildings. Up until now, coax cable dominated the cable TV industry. Now that GLW has come up with a bendable fiber (0.5" bend radius), fiber can now be installed in existing high rise buildings. The market for this bendable fiber is significant and in the next few years, it will only enhance GLW's bottom line.

Apr 05 11:02 AM

[robert99:]

Bought GLW @ $8, sold @ $12 the day before the FED announced the PPIP and the markets rallied 7%. Bah. Trading would be so much easier without government intervention....

Apr 05 12:26 PM

[Larrysyr:]

Corning also has a hand in the diesel catalytic converter market. I've been impressed with how they are constantly looking for new applications for glass and ceramic technology. The LCD market will carry them for now, with the new fiber pitching in. Long term, I expect they'll come up with yet more useful materials.

They also have experience surviving the dot-com crash and coming up with a new winner afterwards. Combine that with a solid balance sheet and attractive P/E, what's not to like?

Apr 06 09:50 AM

[yblarrr:]

Barron's once again has roped in the unwary,down another 1.24
today!


On Apr 06 09:50 AM Larrysyr wrote:

> Corning also has a hand in the diesel catalytic converter market.
> I've been impressed with how they are constantly looking for new
> applications for glass and ceramic technology. The LCD market will
> carry them for now, with the new fiber pitching in. Long term, I
> expect they'll come up with yet more useful materials.
>
> They also have experience surviving the dot-com crash and coming
> up with a new winner afterwards. Combine that with a solid balance
> sheet and attractive P/E, what's not to like?

Apr 07 02:41 PM