Is Corning’s (NYSE: GLW) Post-Earnings Dip a Buying Opportunity?

Corning NYSE: GLW reported fourth-quarter earnings yesterday before the bell and the numbers were great:

• Sales were $3.33 billion, up 17% yoy. Wall Street was expecting $3.19 billion.
• Non-GAAP earnings were 52 cents per share, up 13% yoy and ahead of consensus estimates of 38 cents per share.
• For the quarter, Corning generated $464 million of free cash flow.

Investors reacted, however, by selling off Corning shares; GLW dipped more than 5% on high volume. That move came on the heels of a 3.4% dip on Tuesday.

Higher whisper numbers could be at play here. But it’s important to note that the market got clobbered yesterday. Most stocks that weren’t getting pumped up by an army of Redditors went down yesterday.

There is a good chance that the Corning weakness will be short-term.

A Fast Turnaround

 There were few bright spots in Corning’s Q1 2020 numbers. Three of its five segments saw sales decrease yoy, including two segments – Display Technologies and Optical Communications – that account for more than 60% of Corning’s revenue. In Q2, Corning’s sales dipped 13% yoy.

But the second half of the year was much better. On the Q4 earnings call, management noted that “in the second half, [Corning] improved sales 24% over the first [half].” In Q4, sales in Display Technologies increased 6% yoy and sales in Optical Communications were up 8% yoy.

The demand for large-sized TVs – up more than 60% for the full year – were a tailwind for Corning’s display segment. In 2021, Corning expects the market for large-sized TVs to continue growing – though a repeat of the 2020 growth rate may be asking too much.

The company had more good news; it expects Q1 2021 glass prices to be flat with Q4 2020. What’s so good about that? Well, Corning says that it has seen sequential declines in glass prices in every other first quarter over the last decade. Management attributed the stabilization to “profitability challenges at current pricing levels” for its competitors.

Overall, Corning expects to generate $3 billion to $3.2 billion in sales in Q1 2021, up considerably from the $2.5 billion from Q1 2020. It is projecting non-GAAP earnings of 40 to 44 cents per share, up from 20 cents in the year-ago period and above consensus estimates of 39 cents.

Corning is Producing Glass Vials for COVID-19 Vaccines

Back in June, the US government gave Corning $204 million to manufacture Valor Glass in the hopes that it would be used for COVID-19 vaccine vials. Now that there are FDA-approved vaccines, Corning is set to cash in.

Corning’s life sciences segment, which includes vaccine vials, recorded sales of $274 million in the fourth quarter, up 7% yoy. On the Q4 call, management said that “we’re supplying Valor Glass to several leading COVID vaccine manufacturers. We produced millions of Valor vials and shipped enough for more than 100 million doses, supporting multiple vaccine developers.”

The Valor Glass vials are popular because they are up to 10 times stronger than traditional vials. And this opportunity isn’t limited to COVID-19 vaccine doses – Corning reached an agreement with Pfizer NYSE: PFE to provide Valor Glass vials for other drugs.

The Price is Right

Corning is trading at 18.7x forward earnings. Wall Street expects earnings to grow over each of the next two years, exceeding pre-pandemic levels.

The dividend yield of 2.49% is excellent, and Corning should have no problem raising it in the future.

How Should You Play Corning?

Corning’s combination of value and growth potential makes it an excellent long-term play. That said, the price action has been very bearish of late. You never want to see a stock drop on high volume and close near the day’s lows. But that’s what Corning has done over the last couple of days.

You should look for a reversal before getting in – a day when shares drop early, but find support in the afternoon. That would indicate that Corning’s share price is ready to turn it around. Until then, it’s best to sit tight.