Corning Stock: 5G Stock Bullish on Q1 Beat & Strong Guidance

Corning Incorporated Hikes Dividend 12.5%

Corning Incorporated (NYSE:GLW) is a materials science innovator and leader in specialty glass, optical physics, and ceramic products used in various industries worldwide.

While many probably remember Corning for its cookware (a line it sold off in 1998), the company is now more known for inventing glass optical fiber, ceramic substrates used in catalytic converters, and damage-resistant cover glass for mobile devices. (Source: “At a Glance,” Corning Incorporated, last accessed June 6, 2022.)

The company’s products are used in the consumer electronics, vehicle, optical communications, life sciences, aerospace, and defense sectors.

Corning was founded in 1851 as Bay State Glass Co. Over the years, the company has differentiated itself by continually evolving and innovating its materials science technology to keep up with emerging trends.

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In recent years, Corning Incorporated has dominated the smartphone cover glass market. Additionally, the company has made serious inroads with U.S. telecom network carriers to supply fiber optics for 5G systems.

Healthy free cash flow generation allows Corning Incorporated to reward its shareholders with reliable, growing dividends.

In February, the company declared a quarterly dividend of $0.27 per share, for a yield of just over three percent. (Source: “Corning Announces Increase in Quarterly Dividend,” Corning Incorporated, February 2, 2022.)

The $0.27 payout represents a 12.5% increase over the previous quarterly payout of $0.24 per share. It also represents the 11th consecutive year in which Corning has raised its dividend.

High Q1 Sales & Profitability; Increased Guidance

Corning Incorporated’s innovation and international footprint have helped the company report solid financial results, even during times of some of the toughest economic conditions.

For the first quarter ended March 31, the company announced that its core sales increased by 15% year-over-year to $3.7 billion. (Source: “Corning’s Strong First-Quarter Sales and Improved Profitability Highlight Outstanding Start to 2022,” Corning Incorporated, April 26, 2022.)

The company’s Optical segment continued to be its strongest growth driver, with its revenue up by 28% year-over-year to nearly $1.2 billion. Those gains were fueled by the telecom industry’s increased spending on 5G and broadband projects and the rapid pace of data center build-outs to meet the growing demand for applications moving to the cloud.

The one segment that declined on a year-over-year basis (by seven percent) was Environmental Technologies. That wasn’t entirely unexpected, as supply constraints have continued to hamper the automotive industry.

Corning Incorporated faces the same inflationary pressures as other 5G-related companies. However, Corning has been able to alleviate some of the higher costs by negotiating increased prices in its long-term contracts. This trend is expected to continue throughout 2022.

The company reported first-quarter net income of $581.0 million, a 19% increase over its first-quarter 2021 net income of $487.0 million. Its earnings per share (EPS) rallied by 21% year-over-year from $0.56 to $0.68.

Corning Incorporated’s first-quarter free cash flow of $171.0 million positions the company for another year of significant cash generation.

“We are off to an outstanding start in 2022, driven by broad-based strength across our businesses…” said Wendell P. Weeks, the company’s chairman and CEO. (Source: Ibid.)

He added, “Looking ahead, demand for Corning content has never been greater. We expect strong top- and bottom-line growth this year, as we advance innovations and remain focused on pricing, capital efficiency, and cash generation.”

For the second quarter of 2022, which ended June 30, Corning Incorporated expects to report core sales between $3.7 and $3.9 billion. The company also expects to report EPS in the range of $0.54 to $0.59 for the second quarter.

Management expects its full-year sales to exceed $15.0 billion, growing at a high-single-digit percentage, and expects its EPS to increase by an even higher percentage.

GLW stock’s Recent Performance

Excellent financial results and guidance have been helping Corning stock weather the stock market sell-off better than most tech stocks. As of this writing, GLW stock is:

  • Up by 2.7% over the last month
  • Down by 10.5% over the last three months
  • Down by 1.8% over the last six months
  • Down by 2.2% year-to-date
  • Down by 15.5% year-over-year

Corning stock’s outlook is bright. Of the analysts providing a 12-month share-price target for Corning Incorporated, their average estimate is $42.86 per share and their high estimate is $50.00, for potential gains in the range of 19% to 39%.

Chart courtesy of StockCharts.com

Analyst Take

Corning Incorporated kicked off 2022 with an outstanding quarterly performance, with its core sales up by 15% year-over-year and its EPS up by 20%.

The company continues to successfully navigate inflationary headwinds and complex geopolitical environments. This has contributed to its improved profitability. Thanks to strong guidance, that momentum is expected to continue.

For income investors, GLW stock’s growing dividends should help weather periods of volatility and help combat soaring inflation.