Corning Hits a Home Run: Is Syntax-Brillian Next?

Before the opening yesterday, Corning Incorporated (GLW) reported great results for the last quarter of 2007 and gave even better news for the first quarter of 2008 (see conference call transcript). Earnings per share for the last quarter of 2007, excluding special items, were 0.40 compared to analysts estimates of 0.39. That represents a 29% growth over the same quarter in 2006. For all of 2007, the earnings were 1.41 per share. That represents a 27% growth over 2006. One can thus conclude that Corning is growing at a nice steady rate of around 28%. Using the earnings number for 2007 and the closing price as of 1/25/2008, Corning's P/E would be less than 16.6. Sounds like a value to me!

But the picture gets even better when one looks at the guidance for the first quarter of 2008. Corning expects earnings to be about 0.42 per share compared to analysts estimates of 0.35 per share. One reason why the analysts were targeting low is that, historically, the first quarter is usually Corning's slowest quarter for earnings. Corning surprised everyone by forecasting growth, quarter-to-quarter. That guidance represents a whopping 50% growth over the same quarter in 2007! Now it sounds like GLW is a great value!

Also, where is this recession everyone is worrying about? Either GLW is in a recession-proof industry or word of the economy's demise has been greatly exaggerated.

And this also begs the question, who is next? I would expect that other TV manufacturers and TV component suppliers will be following with great earnings reports and guidance. One company that may suddenly look like a great value, due to its price being driven down recently, is Syntax-Brillian (BRLC). BRLC's price as of the close on 1/25/2007 was more than 22% below its tangible book value of $3.07. It had a P/E below 10 and a PEG of around 0.6 according to Scottrade's calculations. Given the current valuation, GLW's positive view of the LCD industry, the recent insider buying and the high short interest, BRLC looks like a coiled spring just waiting to be sprung next month when BRLC's earnings report is likely to be released.

Disclosure: Author has a long position in BRLC

Comments

[Ben Around:]

I believe that the rebates people will be receiving to shore up the economy, avert a recession, will be spent on home life improvements.

I think HD TVs are now in that category.

People will want to buy something to make staying home more palateable and rationalizing the purchase of a HD TV for the $1200 rebate would be easy.

If you look at value for the money then in "name" brands there is Vizio and Olevia.

Though many will not call them name brands they are getting recognition in the market as "Value" brands.

We could see good things in the near future from BRLC.

2008 Jan 29 04:06 PM

[retrobeast:]

BRLC is a sleeping giant. Their low cost big screen TV's are good quality and there will be an eventual buyout of the company once the competition gets tired of BRLC stealing their customers.
Think of BRLC as the Walmart of the HD tv industry. Low cost brings people in every time.
BRLC will be a $15 stock by end of year. Check out MPEL for another stock about to take off.

2008 Jan 29 04:39 PM

[dmz50:]

You maybe right, got to buy more now.

2008 Jan 30 01:11 AM

[Larry Lazer:]

Add AUO to the list of companies in LCD doing well......

2008 Jan 30 08:07 AM