Corning Stock Is A Technology Value Play

May 12, 2022

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By MarketBeat. Originally published at ValueWalk.

Glass and optical technology products producer Corning (NYSE:GLW) stock has been very resilient as it is only down (-1%) versus down (-23%) for the Nasdaq 100 index. The maker of Gorilla Glass, COVID-19 vaccine vials, and glass substrates used for LED displays and optical fiber, is riding a number of tailwinds despite widespread global supply chain disruptions. The business is spread out through 122 plants located in 15 countries. The CEO stated that the demand for Corning content moving forward has “never been greater”. Glass supply remains tight, but pricing power has enabled Corning to negotiate higher prices on long-term contracts to help mitigate commodity cost inflation. Datacenter builds out tailwinds calling for fiber-rich wireless deployment has enabled optical communications to become the largest revenue segment for Corning. The Company’s majority stake in Hemlock marks its footprint in the ultra-pure polysilicon used in the semiconductor and solar industries. The Company secured multi-year commitments as renewable energy demand continues to grow. Prudent investors seeking exposure to glass substrate technology used throughout the technology and energy sectors can look for opportunistic pullbacks in shares of Corning.

Q1 2022 hedge fund letters, conferences and more

Q1 Fiscal 2022 Earnings Release

On Apr. 26, 2022, Corning released fiscal Q1 2022 results for the quarter ending in March 2022. The Company reported earnings per share (EPS) of $0.54 excluding non-recurring items, beating consensus analyst estimates of $0.49, by $0.05. Revenues grew 14.7% year-over-year (YoY) to $3.74 billion, beating analyst estimates for $3.55 billion. Core gross margins grew sequentially 36.6% YoY. Corning CEO Wendell Weeks commented, “We are off to an outstanding start in 2022, driven by broad-based strength across our businesses – led by 28% year-over-year sales growth in Optical Communications and continued favorable pricing in Display. In the first quarter, company sales grew 15% year over year, with EPS growing even faster at 20%. We successfully navigated a complex geopolitical and external operating environment, and our innovations and pricing actions contributed to improved profitability.”

Guidance Raise

Corning issued its guidance for fiscal Q2 2022 with EPS estimates between $0.54 to $0.59 versus consensus analyst estimates of $0.55 on revenues between $3.70 billion to $3.90 billion versus $3.69 consensus analyst estimates. The Company raised its fiscal full-year 2022 revenues exceeding $15 billion with sales growing at high-single-digit percentages and EPS growing up a few percentage points faster than sales.

Conference Call Takeaways

CEO Weeks had an optimistic tone as he recapped the strong performance in the quarter highlighting the 20% YoY EPS and 15% sales growth in the quarter. He also pointed out the gross margin of 36.6% and operating margin of 17.6% signifying continued YoY efficiency through pricing power in a traditionally weak period. The Company was preemptive in the prior quarter to alert customers of increasing prices on long-term contracts to share in the rising costs. He expects prices to continue to rise into the second quarter as the glass supply remains tight. Optical communications sales grew 28% YoY and comprise 32% of total sales volume. It represents the largest segment of revenues. Operators continue to expand their networks as data center construction accelerates calling for fiber-rich wireless deployments. Mobile electronics customer sales grew 9% driven by strong demand for its premium cover materials and advanced optical products. The Company is raising annual sales expectations to transcend $15 billion. He also noted that Corning owns 80.5% of Hemlock, which manufactures ultra-pure polysilicon for the computer chip and solar industries.

Corning Opportunistic Pullback Levels

Using the rifle charts on weekly and daily time frames provides a precise view of the landscape for GLW stock. The weekly rifle chart peaked near the $4.36 Fibonacci (fib) level. Shares collapsed to bottom out at the $33.46 fib level as it staged a rally on its earnings release. The weekly rifle chart downtrend was disrupted by the earnings gap. This caused the 5-period moving average (MA) resistance to turning into support as it stalled. The weekly 15-period MA also stalled at $38.04 with the weekly 50-period MA just above at $38.75. The weekly 200-period MA support sits at $33.53. The stochastic plummet stalled and is attempting to cross back up again while it’s under the 20-band. The weekly market structure low (MSL) buy triggers above the $38.26 level. The daily rifle chart has a breakout with a rising 5-period MA at $36.55 which overlaps the daily 50-period MA at $36.59 with a rising 15-period MA at $35.47. The daily upper Bollinger Bands (BBs) sit at $38.12 as it overlaps with the daily 200-period MA at $38.21. The daily stochastic has a stochastic mini pup above the 80-band. Prudent investors should wait for opportunistic pullback levels to consider exposure at the $35.32 fib, $33.46 fib, $31.67 fib, $30.04 fib, $27.34 fib, $26.21 fib, and the $25.22 fib level. Upside trajectories range from the $40.76 fib up to the $49.56 fib level.

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