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Shares of Corning Incorporated GLW have surged 120.7% over the past year, driven by improved market demand across its portfolio on the back of a flexible business model and solid cash flow. Earnings estimates for the current and next fiscal have increased 18% and 16.1%, respectively, over the past year, implying robust inherent growth potential. With healthy fundamentals, this Zacks Rank #2 (Buy) stock appears to be a solid investment option at the moment. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Notwithstanding challenging macroeconomic conditions associated with the COVID-19 pandemic, Corning expects to witness 6-8% compound annual sales growth and 12-15% compound annual earnings per share growth through 2023, while investing $10-$12 billion in RD&E, capital, and mergers and acquisitions. It plans to expand operating margin and ROIC and deliver $8-$10 billion to shareholders, including an annual dividend per share increase of at least 10%. To achieve its goals, the company expects to add an incremental $3-$4 billion in annual sales and improve profitability by the end of 2023. The company is extending performance under its 2020-2023 Strategy & Growth Framework, and focusing on improving its product portfolio and utilizing financial strength to enhance shareholder returns. Corning’s capabilities are becoming increasingly vital to diverse industries and multiple opportunities support leadership across all of its market-access platforms.
Multiple factors are likely to drive Corning’s fiber optic solutions business over the next several years, primarily the increasing use of mobile devices that require efficient data transfer and efficient networking systems. Supporting this trend is the proliferation of clouds, which is resulting in increased storage and even computing on a virtual plane. Since both consumers and enterprises are using the network more, there is tremendous demand for quality networking. Also, data consumption patterns are changing. For instance, there is a growing propensity to consume video content, thus creating the need for faster data transfer. As optical networks are more efficient and most of the existing networks are copper-based, the demand for optical solutions is particularly strong. Corning has several products focused on the datacenter with a portfolio consisting of optical fiber, hardware, cable and connectors that helps it to create optical solutions to meet evolving customer needs.
Corning is a leading innovator in the glass substrate industry. The company has been developing formulations that are not only suitable for imparting superior picture quality, but also taking care of their effects on the environment. Corning’s generation 10 substrates use the proprietary EAGLE XG formulation, which serves both these purposes. Corning was the first glass substrate developer with the generation 10 capability. A higher generation substrate is a larger-sized substrate, which enables panel makers to reduce manufacturing costs since more panels can be built from each substrate. Corning’s capability positions it to better serve the secular increase in demand for LCD panels. The company’s fusion technology reduces glass thickness, enabling panel manufacturers to do away with thinning costs that are usually necessary for making slimmer, lighter and more power efficient consumer devices. Also, the company’s Iris glass presents significant growth opportunity.
Moreover, Corning has made significant headway in its Life Sciences segment as it secured additional government funding to substantially augment the domestic manufacturing capacity of glass vials for vaccines. In addition to corporate social responsibilities for contributing to the overall cause of vaccination and treatment of COVID-19 patients, the federal funds are likely to help the company strengthen its position as a leading packaging provider in the healthcare segment.
Corning recently received $57 million from the Biomedical Advanced Research and Development Authority (“BARDA”), which forms part of the Office of the Assistant Secretary for Preparedness and Response at the U.S. Department of Health and Human Services. The BARDA funding is obtained under the White House’s Operation Warp Speed Initiative that aims to develop, manufacture and distribute coronavirus vaccine. With funds worth $204 million received earlier in June 2020, the company has thus secured substantial financial resources to contribute to the surging demand of pharmaceutical glass tubing and vials.
The investment will facilitate Corning to scale up its manufacturing capabilities at three U.S. facilities — Big Flats, NY; Durham, NC; and Vineland, NJ — to bridge the demand-supply gap for glass containers as pharma companies accelerate vaccine production. In particular, Corning will speed up the production of indigenously-built Valor Glass, which is specifically designed for pharmaceutical use with superior chemical durability and minimal particulate contamination for faster and more reliable drug manufacturing and delivery.
It has a VGM Score of B and delivered a positive earnings surprise of 41.6%, on average, in the trailing four quarters.
Other Key Picks
Some other top-ranked stocks in the industry are Ooma, Inc. OOMA, Nokia Corporation NOK, and Sierra Wireless, Inc. SWIR, each carrying a Zacks Rank #2.
Ooma delivered a positive earnings surprise of 163.7%, on average, in the trailing four quarters.
Nokia has a long-term earnings growth expectation of 1.5%. It delivered a positive earnings surprise of 40.2%, on average, in the trailing four quarters.
Sierra Wireless has a long-term earnings growth expectation of 12.5%.
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