Corning's Strong Performance Across Different Segments Will Power Its Long-Term Growth

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Feb 27, 2015

Corning (GLW, Financial) reported solid results for the fourth quarter that came above Street expectations. It was mainly driven by strong demand for its specialty materials along with a boost in sales of its display technologies for television sets. The results are encouraging and reflect its strong position in a competitive and challenging market. Led by its strong performance the stock is currently trading near its 52-week high with better prospects for the days ahead.

A closer look at the performance

Core sales for the quarter rose 29% to $10.2 billion from a year ago period, while earnings adjusted for special items came in at 45 cents a share compared to 29 cents last year. The numbers strongly benefited from the acquisition of Korean LCD glass maker, Precision Materials last year, which was backed by a strong demand for larger LCD televisions. And as the company enters into the first quarter 2015, LCD glass demand continues to be good.

But we must not forget that this was only an extended demand from the previous quarter, and it will see a seasonal performance in the coming months with volume possibly flat or down marginally. Yet again, in the longer run demand will continue to improve in the future. The management anticipates that ultra-high definition sales will at least double to approximately 25 million units in 2015, which reassures the potential in this space.

Strong performance across segments

Talking about its Specialty Materials business, Corning launched its next generation Gorilla Glass4 during the quarter, which received great applause at the recent Consumer Electronics show. This has been designed to address one of the daily challenges faced by consumers, which is breakage of screens from everyday drops. Gorilla Glass4 has two times better damage resistance compared to its peers, which is of significant advantage to the company as it would make the glass maker a prominent choice among customers in this space.

Gorilla Glass is mainly used in smartphones and tablets, with Apple (AAPL, Financial) and Samsung (SSNLF, Financial) being its lead customers among others. According to data published by market research firm TrendForce Global, smartphone shipments rose around 26% to 1.17 billion units last year. And considering the technological advancement in today’s world this trend is expected to increase, which will further bolster its business. Going forward, the management expects Gorilla Glass to drive 10% growth in the Specialty Materials segment.

Corning is also doing well in its Optical Communication business, wherein it reported a sales growth of 12% year over year . In a bid to enhance its growth in this segment, the company has planned to acquire TR Manufacturing, which is an industry-leading provider of fiber-optic and copper cable, component interconnects and electro-mechanical assemblies. The deal will strengthen corning’s position as a leading provider of optical solutions.

Conclusion

These are some strong moves by the company, which makes it stand out in the league. In spite of these positives, we do not find any significant rating revision from major research firms on Corning, which might give us, raised eyebrows. Nevertheless, we don’t have to be suddenly negative when so many rewarding prospects lie ahead. With trailing P/E of 18.46 and a forward P/E of 14.95 Corning seems to be on track to carry on its growth momentum. The stock is already near its 52-week high and in the light of these facts we could see more upside to this stock in the future.