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Is Corning a Value Trap?

November 25, 2012 | About:

Many investors are reeling after losses in PC stocks like Dell (DELL) and Hewlett Packard (HPQ). Another stock that is down in unison is Corning (NYSE:GLW).

First of all, I'll highlight the bullish case for GLW.

The glassware maker boasts a strong balance sheet and a 3.23% dividend yield. The company has almost $3 billion in net cash on its balance sheet which is substantial considering the market cap is only $16 billion. In addition, the stock is selling at the bottom of its five year valuation range based on P/E, P/B, P/CF and P/S.

Earnings estimates for 2013 are $1.35 per share giving GLW a paltry P/E of 8, well below the S&P average.

Recently, an insider purchased a massive stake in GLW. Director Gordon Gund bought 170,000 shares of GLW at $10.76.

The bearish case for GLW is that sales are slowing in its major Display segment. This segment sells glass to television and computer monitor companies.

Fortunately, the company makes gorilla glass, which goes into smartphones and tablets. In that sense, GLW is more diversified than the struggling PC makers.

In the gorilla glass segment, sales jumped 21% year-over-year, with earnings rising by better than 50 percent. However, the year-over-year addition of profit to Corning was just $21 million for the year.

Corning needs sales to jump threefold in order offset the expected losses in the Display business.

Rating: 3.1/5 (9 votes)


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