What To Expect From Corning’s Q4?

Corning (NYSE:GLW) is scheduled to report its Q4 2021 results on Wednesday, January 26. We expect Corning to likely post revenue in-line and earnings above the street expectations. The revenues are expected to trend higher, aided by 5G expansion, cloud computing, as well as higher demand for its display glass products. However, the ongoing semiconductor chip shortage likely weighed on the company’s automotive business.

The company has been able to grow its margins over the recent quarters, a trend expected to continue going forward. Furthermore, our forecast indicates that Corning’s valuation is around $47 per share, which is 34% above the current market price of $35. Our interactive dashboard analysis on Corning’s Pre-Earnings has additional details.

(1) Revenues expected to be in-line with the consensus estimates

• Trefis estimates Corning’s Q4 2021 revenues to be around $3.6 billion, in-line with the consensus estimate.
• Corning is likely to see a pickup in demand for optical fiber as carriers continue to expand their 5G coverage.
• The company’s display glass products business is expected to benefit from better price realization. The company expects tighter glass supply and an increase in glass prices in the near term.
• However, looking at environmental technologies, the sales may decline due to the impact of semiconductor chips shortage on the overall automotive industry. Note that Corning has seen strong sales for its gasoline particulate filters, given the increased adoption of the emission regulations in Europe and China. But the chip shortage issue is likely going to weigh on the overall segment performance.
• Looking back at Q3 2021, Corning’s revenues grew a solid 20% y-o-y to $3.6 billion, led by a 15% growth in specialty materials, which includes Gorilla Glass, with continued high demand for premium glass.
• Our dashboard on Corning’s Revenues offers more details on the company’s segments.

2) EPS likely to be above the consensus estimates

• Corning’s Q4 2021 earnings per share (EPS) is expected to be $0.56 per Trefis analysis, above the consensus estimate of $0.52.
• Corning’s adjusted net income of $485 million in Q3 2021 reflected a 28% rise from its $380 million figure in the prior-year quarter. This can be attributed to higher revenues, and a 60 bps improvement in net margins.
• We expect the margins to improve in Q4 as well, led by a continued strong pricing environment. While inflation has impacted the raw material costs for several companies, Corning will likely be able to pass on the incremental costs to the customers, given the strong demand outlook.
• As such, for the full-year 2022, we expect the adjusted EPS to be higher at $2.40, compared to $1.38 in 2020, and an estimated $2.10 in 2021.

(3) Stock price estimate much higher than the current market price

• Our Corning’s Valuation of $47 reflects a large 34% upside potential from its current levels of $35.
• This represents a P/E multiple of under 20x based on Corning’s expected EPS of $2.40 in 2022.
• If Corning’s results are above the street estimates, as we anticipate, it may result in a rise in its stock price in the near term, and given that the stock appears to be undervalued at it current levels, in our view, investors may be better off buying the GLW stock now.
• That said, there are near term macro risks. With the U.S. Federal Reserve monetary policy-setting meeting coming up on January 26, there are rising concerns of tighter financial conditions that may weigh on the overall markets at large.

While GLW stock may rise in the near term, the Covid-19 crisis 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.

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