Corning (GLW, Financial) has announced a 20% increase in dividend, in line with its pledge to return healthy cash to shareholders and launched an innovative share repurchase program worth $1.5 billion.
Strong volume growth will act as a catalyst
Corning reported improved LCD glass volume exceeding its expectations and allowed by solid demand for bigger LCD televisions, superior volume expansion on year-over-year basis and sequential volume increase in mid-single digits. Display recorded highest sales volume during the quarter.
The increase in the LCD glass volume, leveraged for producing larger LCD televisions in bulk is believed to drive higher revenue for the company and thus supporting its cause to deliver improved shareholder returns.
Corning introduced its advanced Gorilla Glass in the quarter which is attracting significant demand from the key customers. The sales of specialty material for the quarter exceeded its expectations, supported by enhanced demand for Gorilla Glass to be utilized for fresh product introductions.
New products will drive growth
The unique product introductions which are very well received by the customers coupled with the improved display segment sales in the fourth quarter of 2014 is estimated to benefit both the company and its investors hugely.
There was reported another increase in the average television size in 2014 which accelerated the growth in glass markets. Greater than 15-inch screen size televisions expanded over 50% in 2014 with the average screen size expanding over an inch.
The well-managed cost structure and enhanced volume in Optical Communications resulted in another robust quarter for the category. Except China, sales in all businesses increased on year-over-year basis which further added to the already steady growth.
Corning estimates first quarter 2015 sales will expand over 10% compared to the same period last year. Fiber-to-home and enterprise sales have expanded in North America. And Corning’s recent acquisition of TR Manufacturing is believed to add to the organic growth of Optical Communications.
Corning’s environmental sales expanded 5% on year-over-year basis, enabled by a solid pick up in the United States heavy duty diesel sales.
The enhanced sales of Specialty Material and those linked to the environment are expected to accelerate the demand for Gorilla Glass from major device manufacturers.
Corning preserved its share for the aluminum-silicate glass used in major devices against its key competitors. In addition, Corning enhanced its smartphones share in China for this year and also introduced Gorilla Glass 4.
In Life Sciences, the fourth-quarter sales for Corning increased 2% to $862 million on year-over-year basis.
The increased share in the Chinese smartphone market and solid hold over the sales of the aluminum-silicate glass are believed to further solidify the Corning’s cash position.
Therefore, the TV retail demand from the end users in 2015 is believed to be excellent. Moreover, the retail glass market is forecast to remain in high single-digits for 2015 with ultra-high definition sales expected to at least double to about 25 million units during 2015.
Conclusion
Overall, the investors are advised to invest into the Corning looking at the impressive valuations levels indicated by the trailing P/E and forward P/E ratios of 13.75 and 14.42 respectively. The profit margin of 25.45% is also attractive. The PEG ratio of 1.42 suggests slightly costlier growth for the investors. However, the company operations are well supported by its robust balance sheet with total cash of $6.07 billion and total debt of $3.26 billion only, paving the way for key future investments.
