Update Corning (GLW)
When I last visited Corning (GLW) on October 14 http://jubakpicks.com/2011/10/14/update-corning-glw-3/ I said that the stock, then trading at $13.49, was cheap enough to buy but might get even cheaper. (Corning is a member of my long-term Jubak Picks 50 portfolio http://jubakpicks.com/jubak-picks-50/ )
Well, it has. At 3:15 p.m. New York time on November 30 the stock was trading at $13.18. And it might be headed even lower.
Yesterday morning at a Credit Suisse conference the company announced the bad news that everybody was more than half expecting from the LCD glass business.
In the fourth quarter Corning expects LCD glass volume to climb just 5% to 10% from the third quarter versus its original guidance of 20% volume growth.
The lower volumes are a result of lower retail sales of LCD TVs, higher glass inventories at manufacturers, and smaller orders. In October U.S. retail sales of LCD TVs grew by just 4%. That’s down from 13% growth in September.
With lower demand comes lower prices. Prices will fall more than the company had previously expected and that will take earnings down 30% versus the original guidance for a 5% decline.
Corning isn’t thinking that this will be a momentary blip either. The company said it was taking action in the current quarter to reduce its glass capacity.
But do remember that Corning recently increased its dividend by 50% so the company doesn’t think this slowdown will last forever either. Read more
Update Corning (GLW)
A company gets my attention when it raises its dividend 50% as Corning (GLW) did on October 6. Especially when it combines that dividend increase with news of a $1.5 billion stock buyback. And even more especially when it adds in extremely clear guidance for investors to expect a 30% drop in sequential earnings per share because of a slowdown in its industry and some loss of market share. (Corning is a member of my long-term Jubak Picks 50 portfolio http://jubakpicks.com/jubak-picks-50/ )
I think the message from Corning’s management is extremely clear. They think that their company has a great long-term future (hence the dividend increase), that it seriously undervalued (hence the stock buyback), but that the near term is likely to be very rough (hence the negative guidance.)
Let’s take those three points one at a time, last-to-first, okay? Read more
Sell Corning (GLW)
Here’s the dilemma that Corning (GLW) presents to investors right now. It’s one that we’ll face a lot in 2010 with all kinds of stocks.
The Wall Street consensus says that Corning will announce earnings of 42 cents a share when it reports fourth quarter 2009 earnings on January 25.
That would be a huge 223% increase in earnings from the 13 cents a share that the company reported in the fourth quarter of 2008.
So why not hold onto the stock? No need to sell just because the shares have hit my $19 price target, right? At $19, Corning sells for just 14.3 times projected 2009 earnings. That’s without a doubt cheap for a stock growing earnings at 223%.
The problem is that it doesn’t look like Corning is going to grow earnings by 223% in 2010. Or by 123%. But more like 23%. And just about all of that growth will be stacked into the first half of 2010. In the second half of 2010 Deutsche Bank projects that Corning will grow earnings by just one penny from the second half of 2009. That works out to 1.2% growth.
(I think that as investors get further into 2010 they will see a lot of stocks with this kind of earnings growth pattern: Big growth in the first half of the year on easy year to year comparisons and meager growth in the second half on tougher comparisons with post-economic-bust quarters.) Read more
Update Corning (GLW)
The recent past was much better than expected. The near term future is uncertain. And the long-term looks great.
That’s about the way I’d sum up Corning’s (GLW) second quarter report released before the opening bell on July 27.
For the quarter just completed–the recent past–the company reported earnings of 39 cents a share versus Wall Street expectations for 32 cents a share. Revenue climbed to $1.395 billion for the quarter. That was an 18% decline from the second quarter of 2008, but a big 41% increase from the first quarter of 2009.
Corning saw strength across its product line with a 66% increase in total LCD glass for TV screens and similar uses from the first quarter of 2009 and a 14% increase in sales from its telecommunications business on growth in demand for optical fiber from China and in North America from the roll out of fiber to the home from companies such as Verizon (VZ). That latter business is getting a boost from a new Corning technology, bendable fiber, that makes it much easier to get optical fiber to homes and businesses.
Gross profit margin climbed to 41% from 27% in the first quarter.
But Corning said that the third quarter, while strong, wouldn’t show anything like the quarter to quarter growth the company saw from the first to second quarter of 2009. Glass shipments in the third quarter, for example, will be flat or slightly up in comparison to second quarter levels, said CFO James Flaws. Read more
