What To Expect From Corning’s Q1?

by Trefis Team
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Corning stock (NYSE: GLW) is scheduled to report its Q1 2021 results on Tuesday, April 27. We expect Corning to likely post revenue and earnings slightly below the street expectations. The revenues are expected to trend higher led by improved demand for its optical fiber as well as premium glass business. The company expects glass supply to remain stressed, translating into a better pricing environment for Corning. We expect the company to navigate well through the quarter based on these trends.

However, much of the positives appear to be priced in the current value of GLW stock. Our forecast indicates that Corning’s valuation is around $46 per share, which is in-line with the current market price. Our interactive dashboard analysis on Corning’s Pre-Earnings has additional details.

(1) Revenues expected to be slightly below the consensus estimates

Trefis estimates Corning’s Q1 2021 revenues to be around $3.10 Bil, slightly below the $3.13 Bil consensus estimate. The gradual opening up of economies and vaccination programs in the U.S. has resulted in a pickup in economic activities, and this should bode well for Corning’s businesses. The company will likely see increased demand for optical fiber amid 5G expansion. The company is also expected to see market share gains in Europe and China, especially for its gasoline particulate filters. Despite a challenging year, the company managed to grow its gasoline particulate filter sales in 2020, as Europe and China focus on new emission regulations. Looking back at Q4 2020, Corning’s revenues grew 17% y-o-y and 11% sequentially to $3.3 Bil, with this led by strong growth for specialty materials and environmental technologies businesses, a trend expected to continue in the near term as well. Our dashboard on Corning’s Revenues offers more details on the company’s segments.

2) EPS also likely to be below the consensus estimates

Corning’s Q1 2021 earnings per share (EPS) is expected to be $0.42 per Trefis analysis, slightly below the consensus estimate of $0.43. Corning’s adjusted net income of $462 million in Q4 2020 reflected a 14% rise from its $406 million figure in the prior-year quarter. This can be attributed to higher revenues, a modest decline in net margins, and a modest rise in total shares outstanding. That said, the margins are improving going forward, led by a continued strong pricing environment. For the full-year 2021, we expect the EPS to be $2.00 compared to $1.38 in 2020.

(3) All positives priced in the current stock value of $46 per share

Going by our Corning’s Valuation, with an adjusted EPS estimate of around $2.00 and a P/E multiple of around 23x in 2021, this translates into a price of $46, which is in-line with the current market price. The company’s P/E multiple (based on adjusted earnings) has already expanded from around 16x in 2018 and 2019 to 23x currently, and we don’t expect any meaningful growth in the multiple in the near term.

To sum it up, although the pandemic weighed on some of Corning’s businesses in 2020, we believe that a rebound seen in demand over the recent quarters will likely continue in 2021, bolstering the company’s top-line growth, while better pricing will translate into margin expansion. That said, we don’t see any meaningful appreciation in GLW stock in the near term, given its strong 2.5x rally over the last one year or so.

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Earnings for the full year

While GLW stock may be fully valued, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Canadian Pacific Railway vs. D R Horton.

See all Trefis Price Estimates and Download Trefis Data here

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