Corning Incorporated: There’s a Lot More Upside for This Undervalued 5G Stock

Why the Outlook for GLW Stock Is Bullish

Many people might think of cookware when they hear the name Corning Incorporated (NYSE:GLW), but the company sold off that product line in 1998. When it comes to the modern-day Corning, what should come to mind is 5G technology.

Today, Corning Incorporated is known for its specialty glass and ceramics used in broadband networks, TVs, cell phones, wearables, vials, pharmaceutical glass, and catalytic converters.

5G is where the real near-term action is, though.

When you chat on the phone, watch a movie, play a video game on a wireless network, or plug away on a laptop, you are benefiting from wireless nodes that are interconnected by a network of optical fiber.

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With the expansion of 5G networks, more and more fiber is needed.

With existing 3G and 4G networks, macro cells are placed on towers and rooftops a few miles away from each other. This distance results in obstructions and coverage gaps.

5G networks are denser, with cells placed 500 feet apart or less, providing a faster, more connected network.

Optical Communications

The backbone of the new generation of telecommunication networks is optical 5G fiber, hair-thin strands of glass invented by Corning back in 1970. (Source: “Business Segments,” Corning Incorporated, last accessed December 9, 2021.)

Today, the company is responsible for more than one billion km (620 million miles) of fiber worldwide. To keep pace with the world’s ever-evolving telecommunication needs, companies will have to add a lot more fiber.

Corning Incorporated is no one-hit-wonder. The company’s other segments include Display Technologies, Environmental Technologies, Specialty Materials, and Life Sciences.

The Display Technologies segment manufactures glass substrates for flat-panel liquid crystal displays and other high-performance display panels.

The Environmental Technologies segment manufactures ceramic substrates and filters for automotive and diesel applications.

The Specialty Materials segment manufactures glass and plastic labware, equipment, media, serum, and reagents that enable drug discovery and bioproduction.

Over the last 18 months, Corning’s vials have been responsible for delivering more than three billion doses of COVID-19 vaccines. And that number is about to swell.

Pharmaceutical Glass Packaging Portfolio Expands

In November, Corning opened a new pharmaceutical vial manufacturing facility in Durham, NC. The company says it can produce 500 million glass vials per year at the facility. (Source: “Corning Accelerates Delivery of Life-Saving Treatments and Critical Drugs With Expanded Pharmaceutical Glass Packaging Portfolio,” Corning Incorporated, November 19, 2021.)

The company says its “Velocity Vials” deliver better economics, quality, and a more environmentally sustainable design compared to traditional packaging.

Catalent Inc (NYSE:CTLT), a global pharmaceutical company, has recently started using Velocity Vials for COVID-19 vaccines. It has delivered more than one billion doses so far in 2021.

Wendell P. Weeks, chairman and CEO of Corning Incorporated, said the company plans to expand its North Carolina factory until it’s “one of the largest pharmaceutical packaging manufacturing plants in the world.” (Source: “How the Company That Makes Glass for Your iPhone Produces Vials for COVID Vaccines,” CNBC, November 18, 2021.)

The pharmaceutical glass packaging market is expected to grow from $4.0 billion in 2021 to $7.5 billion by 2028, expanding at a compound annual growth rate of eight percent.

Over the coming years, this segment can’t help but fuel additional growth—not that Corning Incorporated is hurting in that area.

“Outstanding” Financial Results

After reporting a wonderful first half of 2021, Corning recently reported “outstanding” third-quarter results, with sales reaching an “all-time high.” (Source: “Corning Reports Third-Quarter 2021 Results as Sales Reach All-Time High,” Corning Incorporated,” October 26, 2021.)

In the third quarter, the company’s sales increased by four percent sequentially and 21% year-over-year to $3.6 billion. The record sales were fueled by significant growth in optical communications.

Corning Incorporated’s net income in the quarter was $371.0 million, or $0.43 per share, while its core net income was $485.0 million, or $0.56 per share.

The company’s free cash flow was $497.0 million in the third quarter. This is an important metric because dividends are paid out of free cash flow. Corning stock currently pays a quarterly dividend of $0.24, for a yield of 2.6%. Corning Incorporated has raised its dividends for the last 11 consecutive years.

Weeks commented,

For the full year, we are on pace to reach $14 billion in sales and over $2 in [earnings per share]. We are successfully capturing a compelling set of long-term growth opportunities by innovating, extending commercial relationships, and scaling operations to meet robust demand. We are advancing our market leadership and expect to grow again in 2022.

(Source: Ibid.)

Despite Corning Incorporated having a pretty stellar year, GLW stock hasn’t been the talk of the town. As of this writing, Corning stock is:

  • Down by 3.9% over the last three months
  • Down by 12% over the last six months
  • Up by 7.3% year-to-date
  • Up by 1.7% year-over-year

Chart courtesy of StockCharts.com

The outlook for GLW stock is upbeat. Analysts on Wall Street have provided an average 12-month share-price forecast of $43.63, with a high estimate of $48.00. That points to upside of 17.5% and 30%, respectively.

Wall Street is notoriously conservative, though, so a 12-month forecast for Corning stock of $53.50 isn’t out of the question.

Analyst Take

Corning Incorporated is an excellent 5G company; this just hasn’t been reflected in its share price in 2021.

The company has been reporting fabulous financial results all year long, and it has provided strong guidance for the fourth quarter.

Thanks to high demand, an expanded market share, increased offerings, and price increases in all of Corning Incorporated’s businesses, 2022 looks like it will be momentous for GLW stock.