Corning (GLW) Last Update 8/11/22
Related: CAT BA LMT GE
% of Stock Price
Revenue
Gross Profits
Free Cash Flow
Corning
$42.18
Yours
Trefis Price
N/A
$29.62
Market
 
Top Drivers for Period
Key Drivers
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TREFIS Analysis


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RECENT NEWS AND ANALYSIS

Potential upside & downside to trefis price

Corning Company

VALUATION HIGHLIGHTS

  1. Optical Communications constitute 46% of the Trefis price estimate for Corning's stock.
  2. Display Technologies & Others constitute 20% of the Trefis price estimate for Corning's stock.
  3. Specialty Materials constitute 17% of the Trefis price estimate for Corning's stock.

WHAT HAS CHANGED?

  1. Impact of Coronavirus On Corning's Stock

Corning stock lost more than 40% – dropping from $30 at the beginning of 2020 to below $18 in late March 2020, owing to the pandemic. It then spiked 2x to around $35 now (through August 9, 2022). That means it is well above the pre-pandemic levels.

Why? While the Covid-19 outbreak and associated lockdowns resulted in an uncertain outlook for the broader markets, the multi-billion-dollar Fed stimulus announced in late March 2020 helped the markets stage a strong recovery. There was a quicker economic rebound, with economies opening up gradually, given the rise in the global vaccination rate.

  1. Q2 2022 Earnings
Corning posted an in-line performance in Q2 2022. The company reported sales of $3.8 billion (up 7% y-o-y), aligning with the consensus estimate. While the semiconductor chip shortage issue that has weighed on automotive production worldwide resulted in a decline in Environmental Technologies sales, the Optical Communications segment saw a solid 22% y-o-y sales growth.

Looking at the bottom line, the company's adjusted EPS stood at $0.57, compared to $0.53 in the prior-year quarter. This can be attributed to the mix of higher revenues and margin expansion. The Q2 earnings were slightly better than the $0.56 consensus estimate.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of Corning's divisions that present opportunities for upside or downside to the current Trefis price estimate for Corning:

  • Corning's Display Technology Revenues: Corning's Display Technologies revenues have fluctuated in recent years due to competitive pressure as well as the impact of acquisitions and divestitures. The figure stood at $4.9 billion in 2021. Looking forward, we expect the figure to increase gradually to around $7.0 billion by the end of our review period in 2028. If however, Corning's display technology revenues were to cross $9.5 billion due to potential manufacturing cost advantage in a period of declining prices, better uptake of its LCD panels, and solid growth from a newer generation of glass, it could lead to a potential upside of 20% to our price estimate.
  • The company’s 3 smaller segments as mentioned above have all been growing faster than the underlying industries on account of a myriad of reasons like – Environmental Technologies' growth was driven by the adoption of Corning’s proprietary gasoline particulate filter (GPF) innovation. Specialty Materials growth was led by the adoption of industry-leading cover glass innovations despite smartphone unit sales being down 3% Life Sciences reached a $1 billion sales milestone in 2019, growing at nearly twice the rate of a strengthening market on account of newer applications, especially in growth categories like cell culture and gene therapy.

    BUSINESS SUMMARY

    Corning is a global technology company that manufactures and processes a variety of products at approximately 119 plants in 15 countries. It makes money primarily through its joint ventures Samsung Corning and Dow Corning. Samsung Corning manufactures glass substrates for active-matrix liquid crystal displays (LCDs) which are primarily used in notebook computers, flat-panel desktop monitors, and LCD televisions. Dow Corning manufactures silicone products. Corning's other business segments include environmental technologies, life sciences, and telecommunications.

    SOURCES OF VALUE

    The display technologies business is the largest contributor to Corning's value.

    Corning's expertise in glass substrate manufacturing

    Corning's Display Technologies segment accounts for nearly 32% of the company's value. Its proprietary fusion-based process produces high-quality glass substrates which are highly uniform, clean, light-weight, and thin, which are important qualities required for manufacturing LCD screens. The process enables Corning to produce large-sized substrates in a cost-effective manner.

    Innovative products help maintain market leadership

    Corning continually invests in R&D to develop innovative products to cater to the demands of LCD panel manufacturers. Corning recently launched Iris glass, which could help replace light guide plates in LCD TVs and make them slimmer and lighter. It also launched a new project named Gorilla Glass SR+, its latest version of Gorilla Glass, which is more scratch-resistant than a sapphire-based cover glass and stronger than Gorilla Glass 5.

    KEY TRENDS

    LCD prices

    Glass manufacturing is a commoditized business where prices are determined solely by factors of supply and demand. Innovations in LCD technology and manufacturing overcapacity are putting downward pressure on LCD prices. However, the price decline in 2019 stemmed in mid-single-digit and the company expects the pricing environment to improve in the near term. As a result, strong demand from emerging markets coupled with growth in TV screen size and ramp-up of the Gen 10.5 plant should aid this recovery.

    Growth in consumer demand for LCD in emerging markets

    Notebook, tablet PC, and LCD television penetration remain low in most emerging markets and developing nations. We expect this demand to increase and drive the growth in global LCD shipments.

    Demand for large sized displays

    Consumers prefer larger displays on their TVs, notebooks, tablets and mobile phones because of the enhanced viewing pleasure. This may drive an increase in demand for LCD glass and thereby increase shipments. The demand for large screen LCD TVs is also likely to be driven by new technologies such as Ultra HD, 4K, and 8K, which provide enhanced viewing pleasure on large screen sizes.

    High replacement rate for LCD in developed markets

    The replacement rate for tablets, notebook PCs, and LCD televisions remains high in developed markets. This is expected to create demand for LCD panels and hence increase the total number of shipments.

    Investment in new technologies for maintaining competitive advantage

    Corning believes it has sustained its competitive advantages in LCD glass substrate products by investing in new technologies. This is likely to continue and could keep costs high.

    Stringent emission standards drive demand for better filters

    To ensure compliance with emission standards, automobile manufacturers resort to the use of emission control systems. As these standards get even stricter, automobile manufacturers have to upgrade to newer and effective emission control systems in order to remain compliant. This has a positive impact on the automotive exhaust systems market, which includes manufacturers of automotive substrates and filters.