Corning: The Technology of Glass

06/19/2019 5:00 am EST


Jason Clark

Contributing Editor, The Prudent Speculator

Electronic components maker Corning (GLW) hosted its 2019 Investor Day last week in which management laid out its plans and goals for the next four years, explains Jason Clark, value investing specialist and contributing editor to The Prudent Speculator.

“Over the past four years, Corning has created substantial shareholder value through successful execution of our Strategy and Capital Allocation Framework,” said CEO Wendell P. Weeks.

“By the end of the year, we will have met or exceeded all the goals we set in late 2015, including returning more than $12.5 billion to shareholders, while investing $11 billion to extend our leadership and deliver growth."

He continued, "We did what we said we would do, and our shareholders have benefitted. We are excited to introduce our new Strategy and Growth Framework and provide insights into how Corning will generate growth and additional value through 2023.”

Management said that over the next four years, it believes that the firm can achieve a 6% to 8% compound annual sales growth, primarily driven by organic growth in Corning`s market-access platforms.

The company sees its EPS compound annual growth rate coming in between 12% to 15%, due to strong sales growth, improved operating margin, and continued share repurchases.

Corning also anticipates generating $16 billion to $18 billion in total operating cash flow before RD&E, up significantly from the $13 billion expected in 2016 through 2019, with $8 billion to $10 billion distributed to shareholders.

“We believe that Corning is more resilient than at any point in its history,” commented CFO Tony Tripeny. “Our strategic investments are paying off and our relationships with industry-leading customers are creating new opportunities for collaboration and growth. Based on these factors and our record of execution, we are confident in our ability to meet the long-term goals we are setting today.”

While some were looking for a bit stronger revenue growth and there are still concerns around the potential impact on Corning from the U.S. trade skirmish with China, we were encouraged by the outlook.

We continue to think GLW offers best-in-class products with a strong management team that has achieved stated goals consistently. GLW yields 2.6% and trades at 15.1 times next 12-month adjusted EPS expectations. Our target price is $44 per share.

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