Company Spotlight - Corning (NYSE:GLW)

  Flat Screens, Fattening Profits

February 22, 2008 - The glass business may not sound like a very exciting field, but Corning (NYSE:GLW) manages to make it so if profits are what get you excited. Amid this ocean of uncertainty and widespread warnings on corporate earnings, Corning affirmed its strong outlook earlier this month. Moreover, the stock is holding up well through the recent market turmoil.

Corning spins glass into a variety of applications used in display technologies (flat panel displays for computers, LCD TVs), telecom (fiber optic equipment), environmental (ceramic technologies and solutions for emissions and pollution control), and life sciences (lab equipment). Aside from weakness in the U.S. trucking industry, which hurts the polution control business, Corning seems well positioned even if a recession is upon us.

Corning's latest guidance is up about 5% from a few months ago when we wrote about it, and puts it on track for growth in excess of 20% this year. Demand for flat screens has allowed the company to turn higher production volume into fatter margins. Gross margins are expected to be in the 48% to 49% range.

Earnings this year are expected to increase 46% for the first quarter, and the 5-year growth rate is seen averaging over 17% according to the analyst consensus. Revenue is expected to grow about 16% this year. That's pretty impressive growth for a company with sales of roughly $6 billion.

Corning's technology-driven business lines are hardly a secret among investors, though. The stock trades at roughly 6 times sales and 17.5 times trailing earnings, while the forward P/E (using 2008 estimates) is about 14. Other figures such as Corning's 26% Return on Equity and relatively modest debt load (less than 8% of the total balance sheet) speak well of the company.

Nonetheless, Corning offers an interesting way to invest in several technology trends with a degree of diversity. The prospect of dramatic acceleration in growth is not there, but the stock offers a dividend of 20 cents per share to yield 0.90% at the current price of $23.42. GLW has held up fairly well through the market collapse so far this year, and judging by Corning's latest statement the corporate performance is justifying the stock performance. It seems demand for flat panel screens even give the potential for upside, so if the market nerves subside and multiples stop compressing, Corning should be an attractive place to be.

Company web site: www.corning.com

 - James Hale