Corning (NYSE: GLW) recently reported its Q1 results, with revenues and earnings exceeding expectations. The company reported core revenue of $3.3 billion, down 3% year-over-year but above the estimated $3.1 billion. Its adjusted earnings of $0.38 per share were down 7% year-over-year and slightly above the forecasted $0.35. Despite the positive quarter, the stock is seen as appropriately priced at levels of $34. In this note, the stock performance, key takeaways from the results, and valuation of Corning are discussed.
When looking at Corning’s stock performance in recent years, it has shown minimal change, moving slightly from around $35 in early January 2021 to about $35 currently, compared to a 35% increase in the S&P 500 over the same period. The performance of GLW stock has been lackluster compared to the index, with returns of 3% in 2021, -14% in 2022, and -5% in 2023. In contrast, the S&P 500 saw returns of 27% in 2021, -19% in 2022, and 24% in 2023, indicating underperformance by GLW.
Consistently outperforming the S&P 500 has been challenging for individual stocks in recent years, even for major tech companies like Microsoft, Apple, and Nvidia. However, the Trefis High Quality Portfolio, consisting of 30 stocks, has outperformed the S&P 500 each year over the same period, providing better returns with less risk compared to the benchmark index.
With the current uncertain macroeconomic environment, there are concerns about GLW potentially underperforming the S&P over the next 12 months. From a valuation perspective, GLW stock appears to be fully valued, with estimates aligning at $34 per share based on an 18x P/E multiple for Corning and expected earnings of $1.91 per share for the full year 2024. This multiple reflects the average over the last five years.
Corning reported a revenue of $3.0 billion on a GAAP basis in Q1, with a 6% year-over-year decrease due to a drop in optical communications and Life Sciences sales. Display Technologies saw a 14% increase in sales, while Specialty Materials and Environmental Technologies sales grew as well. The adjusted operating margin remained stable at 15.5%, with adjusted earnings per share at $0.38. The company expects a rebound in optical communication demand in the upcoming quarters.
Looking ahead, Corning anticipates its Q2 core sales to be around $3.4 billion, with adjusted earnings per share expected in the range of $0.42 to $0.46. While there are positive factors to consider such as pricing actions in Display Technologies and increased demand in Environmental Technologies, many of these positives are likely already priced into the stock. GLW stock has risen 7% in the last five days and now trades at a valuation multiple of 18x forward expected earnings, in line with its historical average. It may be prudent for investors to wait for a dip before entering for potential gains in the long run.