Corning [NYSE: GLW] stock popped in late January 2019 after the company beat on 4Q18 earnings.
The company reported earnings per share that were 28% higher than the same period last year as well as sales that were a 15% year-over-year bump. These same metrics taken on an annual basis increased by 11%.
It was banner performance for the company and its share price rose in response.
The company’s share price has a 52-week range from $26.11 to $36.56. The question is, should you buy Corning stock? Is it the right time to open a position in this specialty glass manufacturer?
While the answer those questions will be different for every investor, there are some common points to consider.
What Does Corning Do?
Corning [NYSE: GLW] is, at its heart, a glass company.
In addition to making glass for household items, Corning also makes Gorilla Glass as well as glass for covers and displays.
Glassmaking also connects the company to next-gen packaging for pharmaceuticals as well as optical fibers. Corning Iris Glass is a good example of the latter. It can be used to develop televisions that are less than half a centimeter thick.
Corning [NYSE: GLW] also has a ceramics component that is involved with consumer electronics, specifically mobile technologies. These are the company’s core businesses.
Corning has a manufacturing and engineering component as well.
It uses vapor deposition to make the purest glass and lowest loss optical fibers possible. The Gorilla Glass used in smartwatches is a good example.
The company also has a fusion process to make exceptionally thin sheets of glass. This technology is used in Corning’s Gorilla Glass and display glass.
It can also be used to make flexible displays and interconnects.
Corning [NYSE: GLW] uses extrusion techniques to make the ceramics in optical fiber cables and life sciences pipettes stronger.
Finally, the company uses precision forming technology to make very accurate vessels for life sciences applications as well as connectors that pull the thin optical fibers together without a splice.
How Does Corning Make Money?
It is equally important to understand HOW the company makes money. For example, Corning’s Gorilla Glass gets a lot of attention – it is in more than 5 billion devices worldwide – but it really counts for less than 9% of the company’s revenue.
In reality, the lion’s share (35%) of Corning’s sales come from its Optical Communications segment, which includes its fiber optics for communication infrastructure services.
Roughly 30% of Corning’s sales stem from its Display Technologies segment and is highly centered around LED and OLED display glasses.
The Specialty Materials segment, which includes Gorilla Glass, accounts for just 14% of the company’s sales in 2017, while Environmental Technologies segment contributes 11% and its Life Sciences segment the remaining 9%.
Should You Invest in Corning Stock?
On the surface, Corning is very well-diversified. In addition to being involved in a variety of segments, it also didn’t count more than 10% of its revenue from a single customer in 2017.
The company also has several distinctive capabilities that could help drive future growth.
Corning’s innovation in the Optical Communications segment has been impressive. According to its 2017 annual report, the company’s sales have been growing twice as fast as the communications infrastructure market as a whole.
It is on track to bring in $5 billion in annual sales for Corning by 2020 and even more going forward.
In contrast, the Display Technologies segment is centered on innovation to produce better images and touch technologies, but it is also focusing on lowering the cost of manufacturing those materials.
Corning is also aiming to double its sales from consumer electronic applications. This has been its goal for some time, but it is making progress, primarily by gaining traction in new markets and new innovations like its products in augmented reality.
Corning is making noise in the automotive industry too.
The company makes gas particulate filters which could turn out to be a major business segment if certain regulations go through in China and Europe.
Its Gorilla Glass is also gaining popularity as more automakers use these products to reduce vehicle weight and create advanced interactive displays.
Income-oriented investors will be pleased to know the company pays a 2.4% dividend.
What are the Risks of Buying Corning Stock?
It all sounds rosy, but there are risks.
While the barriers to entry are huge for Corning’s industry, the company does have competitors and some of them are bigger than the glass maker.
Corning is trying to gain ground on the basis of its innovative products as well as the reliability and quality of those offerings.
There is also the issue of LCD. The company’s Display Technologies segment is heavily based on LCD.
In order for Corning to remain profitable, LCD glass needs to remain popular – over-capacity or the right new development could depress the value.
Moreover, as diversified as Corning is as a company, it is not so diversified within its segments.
For instance, in Display Technologies, three customers account for 62% of sales within that segment.
If Corning lost one or several of its bigger customers, the results could be equally devastating. Finally, you have the industry itself.
When a company is as entrenched in optics as Corning, its share price can move with happenings in telecom.
Corning Stock: Buy or Sell – The Bottom Line
Can Corning go higher? It has a one-year analyst target estimate of $35.81.
The company is on the right track– shifting to cutting-edge uses for its glass instead of television screens and concentrating on innovation as well as innovative uses for its products.
It’s just a matter of whether you think the company can get there first, get there best, or get there for less.