Corning
GLW
(NYSE: GLW) recently reported its Q3 results, with revenues and earnings falling below the street estimates. Although GLW stock is trading at 1.7x sales, lower than its last five-year average of 2.4x, a slight decline in valuation multiple is justified given the declining sales for Corning, a trend expected to continue in the near term.
Corning reported revenue of $3.2 billion, reflecting a 9% decline from the prior year period. Core sales stood at $3.5 billion, marginally short of the street expectations. Its adjusted earnings of $0.45 per share were also lower than the consensus estimate of $0.47 figure. In this note, we discuss Corning’s stock performance, key takeaways from its recent results, and valuation.
GLW stock has faced a notable decline of 30% from levels of $35 in early January 2021 to around $25 now, vs. an increase of about 10% for the S&P 500 over this roughly 3-year period. However, the decrease in GLW stock has been far from consistent. Returns for the stock were 3% in 2021, -14% in 2022, and -17% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 7% in 2023 – indicating that GLW underperformed the S&P in 2021 and 2023.
In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Technology sector, including AAPL, MSFT, and NVDA, and even for the mega-cap stars GOOG, TSLA, and AMZN.
In contrast, the Trefis High Quality Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index, less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could GLW face a similar situation as it did in 2021 and 2023 and underperform the S&P over the next 12 months – or will it see a recovery? From a valuation perspective, GLW stock looks like it has room for growth. We estimate Corning’s Valuation to be $31 per share, reflecting around 17% upside from its current levels of $27. Our forecast is based on an 18x P/E multiple for GLW and expected earnings of $1.71 on a per-share and adjusted basis for the full year 2023. The company expects its adjusted earnings per share to be in the range of $1.70 and $1.75 for 2023. The 18x P/E multiple compares with the last four-year average of 19x. We have lowered the valuation multiple amid falling sales for Corning and a weak demand outlook for its business segments, including display and optical communication.
Corning’s revenue of $3.2 billion was down 9% y-o-y due to a 30% fall in optical communications sales amid fewer orders from mobile carriers. The company saw its profit margin contract 90 bps y-o-y to 7.5% in Q3. Lower revenues and margin contraction resulted in earnings of $0.45 on a per-share and adjusted basis, compared to $0.51 per share in the prior year period.
While GLW stock looks like it has room for growth, it is helpful to see how Corning’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
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