Corning: Looking Very Cheap

Corning Inc (NYSE:GLW) continues to slide reaching a new 52 week low today after being downgraded by RBC Capital Corp and cutting their third quarter outlook yesterday. But the current price/earnings ratio is too low for a company with the earnings and revenue growth displayed.

Third Quarter Troubles

The company reduced their third quarter outlook citing weak LCD display demand although consumers continue to buy televisions containing their LCD glass. The company felt manufacturers are reducing inventory instead of making new television sets. The new company range for quarterly earnings is between 43 and 45 cents. Analysts have been expecting 50 cents a share from the specialty glass maker but reduced that number to 47 cents after the company’s announcement.

Looking Very Cheap

The stock fell 2% today after a Wednesday decline of 12%. At a current price/earnings (P/E) ratio of 4.8 investors are anticipating continued demand trouble as the current estimates are for very strong growth of 32.6% year over year. With 13.5% revenue growth for the year, the current stock price of $16.68 looks very cheap.

The Trade

You could wait for the stock to bottom out and make a move to the upside before buying a little for a longer term hold. If the earnings and revenue continue to be in the double-digit growth range and the P/E continues to be in the single-digit area, the stock will be a good buy.

Disclosure: No position

Comments

[John C. Lee:]

GLW is gonna get cheaper

2008 Sep 05 06:51 AM

[rughetta:]

Weekly TA,

Is that just a guess or do you have any data to support your statement?

Rughetta

Disclosure: I am neither long or short GLW

2008 Sep 05 09:11 AM

[andyn:]

I just bought yesterday. Given the fact that there is a switch to digital transmission in the US from Feb 2009, consumers will naturally think of upgrading their TV sets. And my thesis is that they would move to flat panels which would benefit GLW. I see this back to the mid $20s by year end around holiday shopping season. Good time to pick this up cheap now.

2008 Sep 05 09:28 AM

[Duude:]

But of course, GLW looks cheap if we were to assume 13.5% growth for the remainder of the year. We could use the same logic when we stumble upon a stock with a 15% yield. Don't assume such things will hold true and you'll avoid the nasty trades.

2008 Sep 05 03:00 PM

[Egg:]

"At a current price/earnings (P/E) ratio of 4.8 investors are anticipating continued demand trouble as the current estimates are for very strong growth of 32.6% year over year."

That is very misleading. Trailing P/E is actually ~12 based on the $1.41 Corning made in '07. You are factoring in a 2B+ one time income tax gain into that 4.8 P/E.

2008 Sep 05 04:01 PM

[E Nuff Sed:]

S&P is projecting a 12 month price target of 23. A 40% premium from the current price.

I have been long GLW since 2007. It has been a slow motion train crash since then. So far it has been a losing investment. My guess is that GLW is transitioning from a "growth" stock to a "value" stock. The story is similar to Starbucks, another one of my losing position.

2008 Sep 06 03:19 PM

[2houndz:]

Look at their product lineup: Flat TV screens - not exactly flying off the shelves right now; Glass for mobile phone screens - I think it was GLW who said this week there's a "glut" of it on the world market; Those blue cornflower dishes you got from your grandmother - you didn't buy those, they were hand-me-downs. Those things are purchased every 2nd generation.
Seems like waiting and watching is the best course of action. The market will be open next week and the week after. No need to jump right in because the P/E looks sexy.

2008 Sep 06 04:20 PM

[BerkeleyBob:]

I am inclined to add to my position in GLW at present price level even if initial buy was at $20 and added at $26.50. Annual report and conference call both touch on fiber optic cable and diesel emission control (fiberglass?), both large potential markets. GLW spends for research which over another year or so may well pay off. Inventory/demand for flat screen tv may be slowing but could be the market has over-reacted.

2008 Sep 07 12:49 AM

[moseharper:]

The "weak demand" quoted was actually Asian manufacturers letting inventory run down to match their expectations of sales. Actual current demand had little to do with their actions. It surely hit GLW's price, but it remains to be seen what sales do into '09. I'm a buyer at these levels.

2008 Sep 07 01:48 PM

[Socialism c...:]

Might be temporary consumer slow-down. *But*...they ain't sellin' tube TVs anymore! It's all flat-panel. And...remember...GLW isn't all about TVs - they are in fiber, including their new "bendable" fiber, which makes the "last mile" much cheaper & easier to implement...and they also produce industrial filters, such as those used to reduce pollution from trucks and heavy equipment - that has politics behind it no matter who is in office. Also into solar. The bottom line is that GLW is an innovative company and they keep finding new markets based on their materials expertise and expanding existing ones. This is a company whose story is intact.

I am long GLW.

2008 Sep 08 06:42 PM