Corning Incorporated Displaying Growth

Corning Incorporated (GLW) raised its 4Q guidance on Nov 13th, which is now expected to be in the range of $0.38 to $0.40, up from the previous guidance of $0.36 to $0.38. Sales are now expected to be in the range of $1.53 - $1.56 billion, versus the original expectation of $1.50 - $1.55 billion. There was upward revision in Gross Margin as well. The main revenue growth is from their LCD and OLED display technologies, besides the benefits from strengthening Japanese Yen.

Company Profile

Corning Incorporated provides technology-based products in the United States. It operates in four segments: Display Technologies, Telecommunications, Environmental Technologies, and Life Sciences. The Display Technologies segment manufactures glass substrates for liquid crystal displays that are used in notebook computers, flat panel desktop monitors, and LCD televisions. Corning Incorporated is based in Corning, New York.

Fundamental Analysis

The following reports are as of September 30th 2007 results:

Financial Health

• Current Ratio = Current Assets/Current Liabilities = 2.27
• Total Liabilities/EBITDA Ratio = 3.1
• Total Liabilities/Operating Cashflow = 1.36

Corning has very good financial health with good Operating Cashflow and Net Income. There are few other good items to mention for the past year:

• Their total liabilities has been decreasing
• Current ratio has increased from 1.93 to 2.27

Profitability

• TTM Sales growth: 9.14%
• Last year Sales growth: 12.99%
• Latest Quarter over year ago Quarter sales growth: 21.1%
• TTM Operating Margin improvement: 17.74%
• TTM Return on Asset: 14.57%
• Last 2 year Gross Margin: 43.7%
• TTM Gross Margin: 46%
• Last 2 years Net Margin: 8.5%
• TTM Net Margin: 20.1%

Sales growth has slowed on annual basis, but latest quarter over year ago quarter shows good prospects. Operating efficiency is improving, as seen by operating margin improvement and Net margin improvement. Notice that ROA is very good.

Analysts Rating

• Strong Buys: 4
• Buys: 1
• Hold: 2
• Sell: 1

Since GLW stock has been range bound in the past 1.5 years, the analysts coverage may not be that great.

Weakness/Threats

One of the main threat is that the current tax rate for Corning is low at 13%. As this temporary low tax rate goes away, the net margin can drop and so can the earnings.

General US slowdown can affect the sales growth in the coming months. But that can be a good opportunity in the long run.

Technical Analysis

Conclusion

Corning stock has been range bound for a while now and Corning's balance sheet looks good. Sales growth for the next few quarters can be good for 2 of its 4 segments, namely, Display and Telecom segments. Earnings growth rate is now expected to be 23% and PE ratio at 18. This can be a bullish sign!

The technicals are indicating that we are closer to the bottom now. I think GLW should do well in the next two years from its bottom as determined by the technicals.

Disclosure: none