It’s been months since I put the GLW buy in at this strike price (Entered:11:10:31 02/08/11) and today the stock finally came down to my strike price. As I said on February 8th, Corning’s stock has gained 20% so far this year, I’m looking to buy on a pullback to $20.
I like Corning for several reasons, tops on the list is Gorilla Glass. Reported today from Dow Jones, “Demand For Gorilla Glass Remains Very Strong.” Additionally, Gorilla Glass production in Japan is not being interrupted.
“We intend to continue to maintain our own production levels at both of our Japan manufacturing facilities to replenish LCD glass inventories and provide glass to other geographic regions,” said James B. Flaws, vice chairman and chief financial officer.
Gorilla Glass is bing widedly used in the Tablet Industry:
“What Does the Tablet Industry’s Future Look Like?”
However Gorilla Glass isn’t the only reason to buy GLW. Corning operates in four segments other than display technology. They are Telecommunications, Environmental Technologies, Specialty Materials, and Life Sciences.
The Telecommunications segment produces optical fiber and cable, and hardware and equipment products, such as cable assemblies, fiber optic hardware, fiber optic connectors, optical components and couplers, closures and pedestals, splice and test equipment, and other accessories for optical connectivity to the telecommunications industry. This segment also offers optical fiber technology products for various applications, such as premises, fiber-to-the-premises access, metropolitan, long-haul, and submarine networks.
The Environmental Technologies segment offers ceramic technologies for emissions and pollution control in mobile and stationary applications, including automotive and diesel substrate, and filter products.
The Specialty Materials segment manufactures products that provide approximately 150 material formulations for glass, glass ceramics, and fluoride crystals used in commercial and industrial markets.
The Life Sciences segment provides general labware and equipment, as well as tools for cell culture and bioprocess, genomics and proteomics, and high-throughput screening. This segment also develops and produces various technologies, such as the Corning HYPERFlask Cell Culture Vessel for increased cell yields; and other novel surfaces, which include the Corning CellBIND Surface and the Corning Osteo-Assay surface.
Financial Analysis (Sources include The Street, S&P)
GLW recently traded at a P/E multiple of about 11X, a discount to technology peers. The S&P 12-month target price of $24 is based on a multiple of 12.5X the 2011 EPS estimate, a narrower discount to peers, as S&P believes that while growth is relatively modest, fundamentals have improved. The recent dividend yield is about 1%.
Cornings strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and good cash flow from operations.
GLW’s debt-to-equity ratio is very low at 0.12 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 3.69, which clearly demonstrates the ability to cover short-term cash needs.
Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Electronic Equipment, Instruments & Components industry and the overall market, CORNING INC’s return on equity exceeds that of both the
industry average and the S&P 500.
The gross profit margin for Corning is high; currently it is at 56.00%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 59.20% significantly outperformed against the industry average.
Net operating cash flow has significantly increased by 129.13% to $2,092.00 million when compared to the same quarter last year. In addition, CORNING INC has also vastly surpassed the industry average cash flow growth rate of 46.67%.
As of December 2010, GLW had $6.3 billion of cash and short-term investments and $2.2 billion of debt, with more than half of the debt maturing after 2017. Corning’s inventory rose 27% in 2010 as the LCD supply chain slowed. Analysts at S&P expect the company to reduce inventory in 2011. Expect higher R&D and capital spending in 2011, with investments in production and capacity for thinner, stronger glass to be used for notebook computers and TVs. Corning’s effective tax rate has been below average due in part to a deferred tax allowance, but it is expected it to rise this year.