Corning (NYSE: GLW) not too long ago reported its Q1 outcomes, with revenues and earnings exceeding our estimates. The corporate reported core income of three.3 billion, down 3% y-o-y however above our $3.1 billion estimate. Its adjusted earnings of $0.38 per share had been down 7% y-o-y and had been barely above the $0.35 forecast. Though the corporate posted an upbeat quarter, we expect its inventory is appropriately priced at ranges of $34. On this notice, we focus on Corning’s inventory efficiency, key takeaways from its current outcomes, and valuation.
Firstly, allow us to take a look at Corning’s inventory efficiency in recent times. GLW inventory has seen little change, shifting barely from ranges of $35 in early January 2021 to round $35 now, vs. a rise of about 35% for the S&P 500 over this roughly three-year interval. General, the efficiency of GLW inventory with respect to the index has been lackluster. Returns for the inventory had been 3% in 2021, -14% in 2022, and -5% in 2023. Compared, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 — indicating that GLW underperformed the S&P in 2021 and 2023.
Actually, persistently beating the S&P 500 — in good instances and dangerous — has been troublesome over current years for particular person shares; for heavyweights within the Info Expertise sector together with MSFT, AAPL, and NVDA, and even for the megacap stars GOOG, TSLA, and AMZN. In distinction, the Trefis Excessive High quality (HQ) Portfolio, with a group of 30 shares, has outperformed the S&P 500 annually over the identical interval. Why is that? As a bunch, HQ Portfolio shares supplied higher returns with much less threat versus the benchmark index; much less of a roller-coaster trip, as evident in HQ Portfolio efficiency metrics.
Given the present unsure macroeconomic atmosphere with excessive oil costs and elevated rates of interest, may GLW face an analogous state of affairs because it did in 2021 and 2023 and underperform the S&P over the following 12 months — or will it see a powerful leap? From a valuation perspective, GLW inventory appears to be like like it’s absolutely valued. We estimate Corning’s Valuation to be $34 per share, aligning with its present market value. Our forecast is predicated on an 18x P/E a number of for GLW and anticipated earnings of $1.91 on a per-share and adjusted foundation for the complete 12 months 2024. The 18x P/E a number of aligns with the typical over the past 5 years.
Corning’s income of $3.0 billion on a GAAP foundation was down 6% y-o-y as a result of a 17% fall in optical communications gross sales amid continued softness in demand from cellular carriers, and an 8% fall in Life Sciences income. The corporate expects a rebound in optical communication demand over the approaching quarters. Taking a look at different segments, Show Applied sciences noticed a 14% rise in gross sales, pushed by increased quantity and pricing positive factors. Specialty Supplies gross sales had been up 12%, and Environmental Applied sciences gross sales grew 6%. The corporate noticed its adjusted working margin stay steady y-o-y at 15.5% in Q1. The corporate’s adjusted EPS stood at $0.38, in comparison with $0.41 within the prior-year quarter.
Corning expects its Q2 core gross sales to be round $3.4 billion and adjusted earnings per share within the vary of $0.42 and $0.46. The corporate has some positives to look ahead to. Pricing actions taken within the second half of 2023 ought to proceed to help its Show Applied sciences enterprise. The demand from cellular carriers is anticipated to rebound later within the 12 months. An elevated adoption of gasoline particulate filters will proceed to bolster the Environmental Applied sciences enterprise. Nonetheless, we expect a lot of those positives are already priced in for Corning. GLW inventory has risen 7% within the final 5 days, and it now trades at a valuation a number of of 18x ahead anticipated earnings, aligning with its historic common. We imagine traders will doubtless be higher off ready for a dip to enter GLW for sturdy positive factors in the long term.
| Returns | Might 2024 MTD [1] |
2024 YTD [1] |
2017-24 Whole [2] |
| GLW Return | 0% | 10% | 38% |
| S&P 500 Return | 0% | 6% | 125% |
| Trefis Strengthened Worth Portfolio | -1% | -1% | 604% |
[1] Returns as of 5/2/2024
[2] Cumulative whole returns for the reason that finish of 2016
See all Trefis Price Estimates
The views and opinions expressed herein are the views and opinions of the creator and don’t essentially replicate these of Nasdaq, Inc.
