High-tech glass and metals are the way of the future. Manufacturers want lighter metals, thinner glass, and everything cheaper and better for the environment. Corning (GLW) has been excessively beat up and is at a good price to buy and hold for some long-term gains. Titanium Metals (TIE) is flirting with its 52-week low and also has some amazing growth potential given the increase in commercial aerospace manufacturing.
Corning grew revenues by 22.9% from 2009 to 2010 and by 19.0% from 2010 to 2011. Its stock has taken a hit recently because sales of Gorilla Glass weren't as great as originally expected. It was overly beaten up by that and has some great technologies in the works.
Corning has made several new product announcements in the last few months. First up is Lotus Glass. This glass is thin, environmentally friendly, and can be used with OLED displays and next-generation LCDs. It is currently in production since being announced in October 2011. Next up is Gorilla Glass 2. It is reported to be 20% thinner than the previous version. It also has two interesting emerging uses for its technology. First, a concept car by Hyundai where the glass is used in combination with TOLEDs in the dash display. Everything on the vehicle was chosen because it is eco-friendly. The other is a project with Samsung for touch screen TVs that are designed to be used as tables. One of its most promising technologies is the ultra-slim flexible glass. Once perfected, given Corning's ability to mass produce glass products, it shouldn't be long before it can easily mass produce it. It also recently announced an ultra-bendable fiber optic cable to support the increasing bandwidth needs of companies.
Corning has a solid balance sheet with $5.8 billion in cash compared to only $2.4 billion in debt. That debt is evenly spaced out between 2012 and 2029, so it shouldn't cause any hardships in the near future. Corning recently increased its annual dividend to $0.30/share for a 2.2% yield with a 13% payout ratio. According to its 2011 10-K, telecom sales were up 21%, specialty materials sales we up 86%, environmental sales were up 22%, and life sciences sales were up 17%. Corning reported it knows that its display segment is going to face reduced revenue growth because of slowing demand for LCDs, and that's why it is focusing on flexible and other new technologies.
For 2012, I expect margins and net income to be near flat. The declines in affiliate revenues and declining display growth will be offset by increases in specialty materials, telecom, and environmental sales. Telecoms sales were up 20%, but net income for the segment was up nearly 100% for 2011. Environmental sales grew approximately 22% and net income for the segment grew 181%. I like these two segments and can't wait to see the increasing growth in them for coming years. I also like one of members on the board of directors recently buying 150,000 shares on the open market. Earnings come out next week on the 25th. I am looking for a slight drop going into earnings and guidance that will hopefully restore enough faith to keep share prices flat. Right now, I like the stock for the dividend and think that with an even slightly promising performance, shares could double by the end of 2013.
Titanium Metals is a company that is taking advantage in the acceptance of titanium and increasing aircraft manufacturing. It provides titanium for products such as Boeing's (BA) 787 Dreamliner and the 737 MAX, Airbus' A380, and Lockheed Martin's (LMT) F-35 Joint Strike Fighter. Sales from 2009 to 2010 increased 10.7% and from 2010 to 2011 increased 21.9%. According to Titanium Metals' 2011 annual report, it spent the year renewing key supplier agreements with major customers expiring at various lengths through 2030. Order backlogs at the end of fiscal 2011 totaled $780 million, an increase of 34.5% from end of fiscal 2010. It was able to keep gross margins flat at 21% year over year, even with a decrease in price of $1.60/kilogram of milled products. This tells me that its focus on only titanium is helping it achieve efficiencies to reduce costs.
Titanium Metals' balance sheet is good with $47.3 million in cash and no debt on the books. The decrease in cash from 2010 came from an increase in raw materials and work in progress as it is stocking up to start filling its order backlog. It also offers an annual dividend of $0.30 for a 2.1% yield with a 35% payout ratio. It is spending capital dollars to expand production to also assist with the growing backlog and the anticipated continued growth as commercial aerospace continues to expand.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in TIE, GLW over the next 72 hours.