Why Corning is a Buy After Recent Earnings Release

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Feb 02, 2015

Corning (GLW, Financial) released stunning fourth quarter earnings last week, beating the analysts estimates on both fronts. The company reported earnings per share of $0.45, beating the consensus estimate of $0.38. Revenue came in at $2.6 billion, narrowly beating the consensus of $2.5 billion. The company’s growth was driven by the success of its display segment by almost 70%.

Growth in key areas

Display accounts for a considerable portion of Corning’s revenue; hence the growth should boost investor confidence. The falling prices of LCD glasses have had a negative effect on the company’s margins. However, the prices are stabilizing gradually, and this will act as a tailwind going forward. In addition, the demand for LCD panels will also increase due to consumers replacing their older TVs with larger LCD TVs in North America, and a few countries in the Asia-Pacific region. Also, it is predicted that the drop in oil prices can save an average household close to $750 annually, and this can further propel LCD sales and consumers will be ready to spend more. The LCD TV shipment outlook for 2015 currently stands at 239 million units, up from 223 million in 2014. So, Corning’s LCD revenue should continue increasing.

In addition, the ultra-high definition TV is also expected to drive Corning’s revenue in 2015 and beyond. Shipments for ultra high-definition TV is expected to reach 4 million units in 2015, and revenue is expected to cross $5 billion, more than twice of 2014.

Apart from LCDs and Ultra-HDs, Corning’s Gorilla Glass business is also on track to receive a boost this year. Corning’s upcoming Gorillas Glass 4 aims to tackle mobile users’ most common problem —Â durability. The Gorilla Glass 4 is said to be twice as strong as Gorilla Glass 3 and other competitors. Corning introduced Gorilla Glass 4 in November amid strong consumer and manufacturer demand for improved smartphone screen-breakage resistance, and the company should benefit from the launch of Gorilla Glass 4.

New Products

In January 2015, GLW and Diebold, Incorporated (DBD) presented the initially automated teller machine (ATM) touch screen offering antimicrobial Gorilla glass. The glass is detailed with an implanted antimicrobial specialists, ionic silver, which represses the development of green growth, mold, buildup, growths and microscopic organisms on its surface. GLW additionally advertised their Fibrance item, which is a glass optical fiber made for flimsy, vivid, tasteful lighting that empowers embellishing lighting to be planned or implanted into tight or little places where other massive lighting components can't fit. At long last, GLW proclaimed Iris glass, a substrate that can essentially lessen the thickness of a fluid gem show TV set, making it as flimsy as a cell phone. The organization created Iris Glass for utilization as a light-guide plate in edge-lit LCD Tvs. Iris Glass is 36 times stiffer than plastic, liberating board producers to outline Tvs that are short of what 10 millimeters thick.

GLW's utilization of Gorilla Glass in Atms opens up an entire new market for the item, which has beforehand been considered utilized for spread glass for handheld and machine gadgets.

Conclusion

Corning’s earnings affirm the fact that the company’s key business segment is growing at a rapid pace, and due to the reasons mentioned above, I expect this trend to continue. Also, the company is well positioned to gain traction in the booming Ultra-HD market. Hence, in my opinion, these tailwinds make Corning a buy.