Corning, N.Y.-based Corning Incorporated (GLW) is a leading materials science technology company with more than 170 years of experience in glass science, ceramic science, and optical physics. It operates in five segments: Display Technologies; Optical Communications; Environmental Technologies; Specialty Materials; and Life Sciences.

GLW increased its quarterly dividend payout by 12.5% to $0.27 yesterday, payable on March 30, 2022. The company currently pays $1.08 in dividends annually, yielding 2.25% on its current price. Its 2.53% four-year average dividend yield is 73.7% higher than the 1.45% industry average. Shares of GLW surged 1.4% in price intraday yesterday on the news to close yesterday’s trading session at $42.74. Furthermore, the stock has gained 14.8% in price year-to-date.

GLW’s senior vice president and corporate controller Edward Schlesinger said, “Today’s dividend announcement reflects Corning’s confidence that we’re building a solid foundation for the future. We are making great progress in all our businesses while delivering consistent growth and generating strong cash flow. We are well positioned to invest in the opportunities we see ahead while continuing to reward our shareholders.” GLW aims to increase its dividends by at least 10% annually through 2023, under its Strategy & Growth Framework goal and its disciplined capital allocation.

Here is what could shape GLW’s performance in the near term:

Mixed Financials

GLW’s net sales increased 2% sequentially to $3.68 billion in its fiscal fourth quarter, ended Dec. 31, 2021. Its net income rose 31% from the prior quarter to $487 million. However, the company’s non-GAAP core net income slumped 4% from its fiscal third quarter to $465 million. Its non-GAAP core EPS was $0.54, reflecting a 4% decline from the last quarter. And its free cash flow fell 8.4% year-over-year to $425 million in the last quarter.

Stable Growth Prospects

The Street expects GLW’s revenues to increase 9.6% year-over-year in its fiscal 2022 first quarter (ending March 2022), 5.7% in the next quarter, 6.9% in fiscal 2022, and 5.7% next year. The company’s EPS is expected to improve 11.1% in the current quarter, 5.7% in its fiscal 2022 second quarter (ending June 2022), 14% in the current year, and 13.6% next year. In addition, analysts expect the company’s EPS to rise at a 22.1% CAGR over the next five years.

Low Valuation

In terms of forward non-GAAP P/E, GLW is currently trading at 18.03x, which is 20.8% lower than the 22.77x industry average. Its 1.17 forward non-GAAP PEG ratio is 24.4% lower than the 1.55 industry average.

GLW’s forward Price/Sales and Price/Cash Flow multiples of 2.35 and 10.73, respectively, compare with the 3.76 and 21.11 industry averages. In addition, the stock’s 2.65 forward EV/Sales multiple is 31.6% higher than the 3.88 industry average, while its 9.33 forward EV/EBITDA ratio is 38.1% higher than the 15.06 industry average.

Consensus Rating and Price Target Indicate Slight Upside

Of the eight Wall Street analysts that rated GLW, seven rated it Buy while one rated it Hold. The 12-month median price target of $48.50 indicates 13.5% potential upside from yesterday’s closing price of $42.74. The price targets range from a low of $44.00 to a high of $52.00.

POWR Ratings Reflect Uncertainty

GLW has an overall C rating, which equates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

GLW has a C grade for Stability and a D for Growth. Its relatively high 1.08 beta is in sync with the Stability grade. In addition, the company’s net income and EPS have declined at rates of 12.4% and 16.9% per annum, respectively, over the past five years, justifying the Growth grade.

Among the 39 stocks in the Industrial – Manufacturing industry, GLW is ranked #19.

Beyond what I have stated above, view GLW ratings for Sentiment, Quality, Value, and Momentum here.

Bottom Line

With a $3.49 billion market cap, GLW is an industry leader in the materials science technology space. However, the company has an ISS Governance QualityScore of 8, indicating high governance risk. Though GLW increased its dividend recently, its free cash flow declined sequentially in the last quarter, raising concerns regarding its ability to meet its dividend payout obligations. Thus, we think investors should wait until GLW’s cash flows stabilize before investing in the stock.

How Does Corning Incorporated (GLW) Stack Up Against its Peers?

While GLW has a C rating in our proprietary rating system, one might want to consider looking at its industry peers, Core Molding Technologies Inc. (CMT), Vishay Precision Group, Inc. (VPG), and Mueller Industries, Inc. (MLI), which have an A (Strong Buy) rating.

GLW shares were trading at $42.87 per share on Thursday morning, up $0.13 (+0.30%). Year-to-date, GLW has gained 15.15%, versus a -4.86% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

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