A long-term investment in Corning's (NYSE:GLW) shares is more than just a play on the company's transformation through its acquisition strategy, new product offerings and its capital allocation plan. A key component that will drive the company's revenue and earnings growth is how outside companies take GLW's products and develop new uses for such products. In other words, every time an outside company incorporates a GLW product into an innovative product that solves unmet needs, GLW benefits through increased revenues and earnings. Right now is an exciting time for GLW and its shareholders as more and more outside companies are innovating by creating products that use the company's products in a new and unique way. Innovative third-party uses of GLW's products are an important part of the company's transformation story to balance its revenue/earnings across all of its divisions more evenly and lessen its dependence on the company's price sensitive LCD glass business. (GLW is also transforming and balancing out its revenue/earnings through periodic acquisitions to fold into its non-display glass divisions.) In this article, we will highlight two new uses of GLW's glass products that are likely to be offered in the intermediate term. If you are a GLW investor like we are, you will be excited by the prospects of the innovative uses of GLW products.
Earlier in 2017, we highlighted GLW's announced glass-enabled concept vehicle showcasing a variety of uses for its Gorilla Glass product for multiple automotive applications. GLW's adapted Gorilla Glass product for the automotive industry allows it to deliver lighter, tougher, and more optically advantaged solutions, enabling improved fuel efficiency, and a safer, more enhanced user experience for both drivers and passengers. GLW's concept vehicle also includes a lightweight Gorilla Glass hybrid windshield with augmented reality capabilities, providing real-time updates on traffic and landmarks, and enabling a lighter, more fuel-efficient ride. Such car also has a Gorilla Glass dashboard and floating center console, providing users with fully integrated connectivity that keeps drivers and passengers informed and entertained. Since GLW's introduction of its concept vehicle, we have begun to see third parties engaging in research and development incorporating Gorilla Glass into automobiles. One company studying the use of Gorilla Glass in an automobile in the intermediate term is Magna International, Inc. ("MI") (along with, among others, the U.S. Department of Energy).
MI, in cooperation with its partners, recently announced it developed a new, ultralight door architecture that achieves a 42.5 percent mass savings compared to an average current production door. MI, in less than 10 months, developed a cost effective door module concept that is applicable to about 70 percent of the light-vehicle market. The most significant part of the mass savings in the concept design involves incorporating aluminum in many parts of such door concept module that formerly used steel. The third most important aspect of such mass savings, however, is the use of GLW's Gorilla Glass. In particular, 12 percent of such door concept mass savings is the result of using chemically strengthened Gorilla Glass and an acoustic inner layer in the door module concept product. Although MI's door concept module is not currently ready for production vehicles, it has passed all safety and durability tests. The next steps towards offering the design to automobile makers is manufacturing full-scale prototype door assemblies, performance tests, and safety tests to validate the design, with the goal of being available for use in production vehicles by the fall of 2020. Such a use of Gorilla Glass for the automotive market reflects GLW's desire to leverage its precision glass capabilities, fusion manufacturing expertise, and auto industry experience to encourage and assist third parties to extend the presence of Gorilla Glass in the automotive market.
SolarWindow Technologies, Inc. (OTCQB:WNDW) is another third-party currently engaged in research and development to incorporate one of GLW's glass products in an innovative manner. WNDW, a leading developer of transparent electricity-generating coatings for glass windows and flexible veneers, announced its plan to develop electricity-generating flexible glass. In particular, WNDW's scientists and engineers recently applied layers of its liquid coatings onto GLW's Willow Glass and laminated them under conditions that simulate the high pressure and temperatures of the manufacturing processes used by commercial glass and window producers. The result was a bendable glass "veneer" which generates electricity. WNDW anticipates installing these sheets of electricity-generating glass veneers over existing office tower windows, turning buildings into vertical power generators and helping decrease their carbon footprint. The company also believes that such veneers could be applied to flat and curved surfaces on automobiles, trucks, buses, airplanes, and boats to generate onboard electrical power. WNDW's veneer products are being developed in collaboration with the U.S. Department of Energy's National Renewable Energy Laboratory in an effort to commercialize WNDW's products. While we saw no specific timeline for when WNDW would offer its products incorporating Willow Glass, we are once again excited by this innovative use of a GLW product.
We highlight the above intermediate term uses of GLW's products to keep the company's investors and potential investors informed of the myriad of possible uses of GLW products. We also highlight such uses to inform investors as to why GLW shares are a solid long-term investment despite potential near-term negative pronouncements made by analysts. In other words, GLW has so much going for it in the long term that the investment community fails to focus on given its near-term myopia that less informed investors may be turned off by any negativity towards the company. Third-party development of new uses of GLW products, however, is just one element that will help the company drive more consistent revenue/earnings growth over the long term. The company's above-noted transformation also involves internally developed new product offerings combined with product offerings obtained through acquisitions. With this in mind, we believe that new long-term GLW investors can still harvest shareholder rewards that will result from GLW's transformative actions. With the company's shares trading at multi-year highs, however, we believe that new investors should wait for the company's shares to fall by about 5 to 10 percent before purchasing such shares.
Third-party innovative uses of GLW's products are yet another piece of the puzzle supporting a continued long-term investment in GLW's shares. The company's shares recently broke out of a multi-year trading range, and, in our opinion, are in the beginning of a multi-year move upward given the transformative efforts GLW has taken in recent years. Aside from GLW promoting and assisting third-party companies in developing innovative uses for GLW products, GLW's transformational activities also include internal research and development, capital spending, product innovation, acquisitions and divestitures. With respect to the technologies the company will focus on, GLW will remain primarily focused on technology markets where it is a leader and that will provide it with significant growth/returns for investors.
GLW's forward price-to-earnings ratio is about 16.00 based on 2017 earnings estimates of $1.67 and 14.90 based on 2018 earnings estimates of $1.79. We believe that long-term investors should consider purchasing GLW shares on any overall market selloff. Over the long term, GLW's innovative research and development abilities, aggressive acquisition strategy, capital allocation plan and third-party innovation incorporating GLW's products will reward investors with dividend increases, share repurchases and share price appreciation. The company's shares, which have a dividend yield of about 2.35 percent, remain one of our favorite investment ideas despite trading near 52-week highs.
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Disclosure: I am/we are long GLW.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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