Bull Of The Day: Corning Incorporated (GLW)

Corning Incorporated (NYSE:GLW) (GLW) manufactures and sells specialty glasses, ceramics, and related materials worldwide. The company operates through five segments: Display Technologies, Optical Communications, Environmental Technologies, Specialty Materials, and Life Sciences. Through those segments Corning manufactures optical fiber, cable and photonic products for the telecommunications industry; and high-performance displays and components for television and other communications-related industries. The company also uses advanced materials to manufacture products for scientific, semiconductor and environmental markets.

After posting earnings that came in line, Coring has seen estimates tick higher. In addition, the company has just been added to the Conviction Buy list at Goldman Sachs (NYSE:GS) and recently became a Zack Rank #1 (Strong Buy) making the stock the Bull of the Day.

New York based Corning has a market cap of $22 Billion with a Forward PE of 14. The company sports a Zacks Style Score of “B” in value and pays a dividend yield of 2.69%. EPS growth over the next 3-5 years is expected to come in at 7.47%

Earnings

Corning reported Q1 earnings on April 26^th seeing $0.28 versus $0.28 expected. Revenue came in at $2.17 Billion verse the $2.22 Billion expected. Investors sold the stock because of the revenue miss, but the stock has grinded back to pre-earnings levels.

The companies segments reported as follows:

-Display technology sales $829M v $972M y/y

-Optical Communication sales $609M v $697M y/y

-Specialty Materials sales $227M v $272M y/y

-Environmental Technologies sales $264M v $282M y/y

-Life Sciences sales $204M v $197M y/y

CEO Wendell Weeks had some comments on the quarter : "We are pleased that we were able to meet overall profit expectations in the first quarter despite the impact from a manufacturing software implementation issue. We expect strong sequential core sales and profit growth in the second quarter. We are also making great progress on our four-year plan to grow, return cash to our shareholders, and create significant value."

Earnings Estimates

Earnings estimate revisions for both fiscal year 2016 and 2017 are headed higher, while the current quarters are stagnating. Over the last 60 days, Corning has seen four analysts give upward revisions for the current year and next year.

For fiscal year 2016, estimates over have gone from $1.34 to $1.36 over the last 60 days, a bump of 1.5%. For the same time period, fiscal year 2017 has seen a 7.9% jump, from $1.51 to $1.55. If Corning can beat on EPS when it reports on July 27^th the stock should see a move back to 2015 highs.

EPS Beats

Corning has a very strong history of surprising to the upside. Since 2013 the company has never missed, making it fifteen straight beats since 2012. While investors bought the stock in 2013 and 2014 after beats, 2015 wasn’t the same case. But recently the trend has come back as the last two quarters have seen buyers come into the stock after an EPS report.

Conviction Buy

Goldman Sachs recently added Corning to their Conviction Buy List. Goldman says a recovery in glass volume is seen driving positive inflection in revenue growth, starting with 2Q earnings on July 27. Analyst Doug Clark sees buybacks as under-appreciated following sale of Dow Corning and sees upside to EPS driven by revenue in 2016. He has a price target of $27, 30% higher from here.

In Summary

Corning is a valuation play that allows investors a good risk rewards headed into earnings on July 27^th. Expect the company to beat again and for the stock to start to trend to 2015 highs and beyond. Look for revenue growth to be the driver and improvements within each individual segment.

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