GLW - Corning stock dips after UBS downgrades on seeing balanced risk/reward

2023-07-14 08:13:34 ET

UBS Research downgraded Corning ( NYSE: GLW ) to Neutral from Buy as the analysts think that the recent stock performance has resulted in a more balanced risk/reward profile.

The analysts noted that they downgrade Corning as they reduced estimates on a slower recovery in customer demand and view the company's stock more fairly priced.

The analysts think Corning's largest business, display glass (~45% of income), has reached trough levels with Q1 LTM earnings ~$693M compared to 2017-2022 average of ~$825M, and they continue to model sequential improvement beginning in Q2.

The analysts reduced their topline estimates for 2023e/24e by ~2%/1%, largely reflecting a slower volume recovery in Corning's Display and Specialty businesses, slightly offset by pricing actions in the Display business.

However, the analysts see lower flow through of price increases to earnings as they are mainly intended to recover inflationary impacts across cost structure, while margins remain impacted by weaker fixed cost absorption. This leads to 2023e/24e EPS declining ~5%/4%.

The analysts continue to anticipate a strong uplift in government broadband spending to drive ~11%/10% growth in Optical sales in 2024e/25e, but they see a slower recovery in consumer electronics spending.

The firm noted that this pushes out its earnings ramp from current near-trough levels, and its updated estimates assume Corning's specialty business now takes until 2025e to recover to previous peaks (~$2B).

The analysts now expect overall 2024e/25e sales growth near to ~8%/6%, steering 2024e EPS of ~$2.35, ~2% below consensus.

GLW -2.21% to $35.03 premarket July 14

More on Corning

• Corning Incorporated: Decent Entry Point For The Long-Term Oriented Investor
• Corning Stock: Bullish Into Q2 Earnings

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