GLW - Corning: Near-Term Weakness But Considerable Long-Term Opportunities

2024-04-15 22:32:03 ET

Summary

• Corning has grown modestly during the last decade (CAGR: +4%), underpinned by a wide moat and strong competitive advantages, limiting the scope for disruption through competition.
• The company is highly diversified, servicing a range of end users. Many of these are enjoying considerable tailwinds, including AI cloud adoption and the 5G rollout.
• We expect these tailwinds to push growth into the 5-10% region, alongside the delivery of margin improvement following a period of erosion.
• This said, Corning’s recent performance has been poor and below its peers, suggesting greater exposure to economic conditions. We see this subsiding post-Q2.
• Corning is trading at an FCF yield of ~5%, which we believe is highly attractive given its growth potential, scope for margin improvement, and current distribution policy.

Introduction and thesis

Corning Incorporated ( GLW ) is a global technology company specializing in advanced materials and specialty glass. Founded in 1851 and headquartered in Corning, New York, the company operates in five segments: Display Technologies, Optical Communications, Environmental Technologies, Specialty Materials, and Life Sciences.

Corning is a compelling business as its expertise is in a niche segment of specialized advanced materials, but has a broad application across a range of industries. Through considerable investment and development over time, Corning has created a compelling competitive position, with a wide moat and relationships with leading firms....

For further details see: