Corning Incorporated: A 170-Year Old 5G Stock?

GLW stockThis 5G Stock Is Firing on All Cylinders

5G adoption has only been going on for a few years, so unsurprisingly, many young tech companies have been developing the next big 5G applications.

But there are plenty of old businesses that are ready to ride the 5G wave, too. Just take a look at Corning Incorporated (NYSE:GLW).

Corning’s history can be traced all the way back to a Somerville, MA-based glassworks business in 1851. Over its 170-year history, the company has become one of the leading innovators in material science.

Today, Corning boasts unparalleled expertise in glass science, ceramics science, and optical physics. The company also has manufacturing and engineering capabilities and serves a wide range of markets, including optical communications, mobile consumer electronics, display, automotive, and life sciences.

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Corning Incorporated’s products include damage-resistant cover glass for mobile devices, precision glass for advanced displays, optical fiber, wireless technologies, and connectivity solutions for communication networks.

At this point, it should be quite clear why GLW stock is a 5G stock. Corning’s solutions are useful both in 5G consumer devices and in the build-out of 5G networks. So as we enter the 5G era, the company’s business should get a solid boost.

Indeed, that’s what has been happening. In the first quarter of 2021, Corning generated $3.3 billion in net sales, representing a 38% increase year-over-year on a reported basis and a 29% increase year-over-year on an adjusted basis. (Source: “Corning’s First-Quarter Results Reflect Strong Start to 2021,” Corning Incorporated, April 27, 2021.)

Note that the top-line number not only beat Wall Street’s expectation of $3.1 billion, but also outperformed the company’s own guidance range of $3.0 to $3.2 billion.

The bottom-line number was even more impressive: Corning generated core earnings of $0.45 per share, up 125% from a year earlier. Again, the number came ahead of expectations. Wall Street was projecting adjusted earnings of $0.43 per share while the company’s own guidance range was $0.40 to $0.44 per share.

There was growth across the board, as every segment of Corning Incorporated grew its sales and net income by a double-digit percentage from a year earlier.

For instance, the company’s Optical Communications segment grew its sales by 18% and its net income by 283%. The Display Technologies segment grew its sales by 15% and its net income by 40%. The Environmental Technologies segment grew its sales by 38% and its net income by 111%.

And 5G should continue to drive growth for the company.

Verizon Communications Inc. (NYSE:VZ) recently named Corning as a leading network partner for 5G radio nodes in retail and other venue deployments of millimeter-wavelength systems.

At the same time, Corning Incorporated’s fiber-optic cable manufacturing facility in Hickory, NC is leveraging Verizon’s mobile edge computing platform with Amazon.com, Inc.’s (NASDAQ:AMZN) “Amazon Web Services” to explore how 5G can reshape manufacturing.

Also worth noting is that, in the first quarter, there were more than 25 smartphones launched featuring Corning’s “Gorilla Glass.” With smartphone sales expected to be very strong this year due to the 5G rollout, Corning’s mobile consumer electronics business should continue to prosper.

Keep in mind that, like many other companies, Corning Incorporated experienced higher freight and logistics costs as a result of global supply chain disruptions in the first quarter of 2021. This led to an impact of about $50.0 million on profitability for the quarter.

But management expects the situation to get better.

In Corning’s latest earnings release, its executive vice president and chief financial officer, Tony Tripeny, said, “Multiple events disrupted global supply chains in the first quarter, and we experienced elevated freight and logistic costs that impacted profitability. We expect that these costs will normalize longer term and will begin to decline in the second quarter as we take mitigating actions.” (Source: Ibid.)

For the second quarter, Corning Incorporated expects to generate core sales of $3.3 to $3.5 billion and core earnings per share of $0.49 to $0.53.

Considering that Wall Street’s previous projection for the second quarter was $3.2 billion of revenue and earnings of $0.48 per share, even the lower end of the company’s guidance range was above analysts’ consensus estimate.

Corning Incorporated (NYSE:GLW) Stock Chart

Chart courtesy of StockCharts.com

Analyst Take

Corning stock had a strong rally in recent months. However, it fell after Corning Incorporated’s most recent earnings report, even though—as discussed earlier—the results were more than impressive.

Given that we’re still in the early days of the 5G era, the uptrend in GLW stock might not be over just yet.