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Corning Outperforms Tech Sector in 6 Months: Should You Invest?
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Key Takeaways
GLW has gained 69.6% in six months, outperforming the tech sector and S&P 500.
GLW's targets more than $4B in annualized sales by 2026, driven by strength in multiple verticals.
Corning faces execution risks as AI related demand may outpace supply, while Display segment face headwinds.
Corning Incorporated (GLW - Free Report) has gained 69.2% in the past six months compared with the communications components industry’s growth of 97.2%. The stock has outperformed the Zacks Computer & Technology sector and the S&P 500’s growth during this period.
Image Source: Zacks Investment Research
It has underperformed its competitor CommScope Holding Company, Inc. (COMM - Free Report) but outperformed Amphenol Corporation (APH - Free Report) . CommScope has surged 136.1%, while Amphenol has gained 45.1% in six months.
Key Growth Drivers for Corning
Corning’s Springboard plan, a strategic initiative focused on generating significant sales growth, driving strong incremental profit and cash flow, is paying off. The initiative aims to realize more than $4 billion in annualized sales by the end of 2026 with an operating margin target of 20% during the same time frame. The company has taken a versatile approach to achieve this.
Along with closely working with its customers and suppliers across the segments, it aims to understand emerging market trends and drive its research and innovation initiatives in that direction. AI data centers, Solar market and consumer electronics remained the major growth engines for the company.
AI data centers require far more fiber connectivity than the legacy ones. Corning’s leading-edge Gen AI fiber and cable systems, which can enable two-to-four times the amount of fiber in an existing conduit, are gaining significant market traction as hyperscalers expand their data center footprint to support surging AI workloads. Corning’s innovative solution reduces the need for the development of new conduits to some extent. Corning’s optical connectivity products are expected to gain from substantial growth in the AI data center market.
Consumer electronics continue to be a stronghold for Corning. Leading manufacturers such as Apple, Samsung, Motorola, HP and Dell are incorporating Corning’s cover materials across their flagship devices. It is also gaining traction in the solar market. Corning is a market leader in semiconductor polysilicon, a material used in the solar industry for wafer manufacturing. It has a polysilicon semiconductor production hub in Michigan, U.S. The company has now built a solar ingot and wafer facility in the region. The colocation has created a vertically integrated manufacturing ecosystem that will strengthen its position in the U.S. domestic solar supply chain.
Along with such a strong focus on innovation, the company is placing strong emphasis on financial discipline. Owing to solid demand trends, the company expects to achieve its 2026 operating margin target one year ahead of plan. During the September quarter, Corning generated $784 million of net cash from operations compared with a cash flow of $699 million in the year-earlier quarter.
Image Source: Zacks Investment Research
Major Challenges for Corning
Demand for Corning’s Gen AI optical products is rapidly growing and may outpace the company’s ability to supply. The company has to allocate capital to expand manufacturing, or else it might lose its customers to competitors like CommScope or Amphenol. AI-related demand can fluctuate for multiple factors. Hence, management is reluctant to increase capacity without customer commitments. If growing capex spending does not translate into higher sales, it will put pressure on profitability and cash flow, negatively impacting investors’ confidence.
In the third quarter, Display segment revenues were down 7% year over year. Although the business remains profitable, growth prospects are affected by macro headwinds and soft end-market demand. Its Automotive business segment is witnessing headwinds owing to weakness in heavy-duty markets, particularly in North America.
End market diversification is limited within the Display and Optical segments, which account for more than half of total revenues. Since the Display Technologies and Specialty Materials segments are largely dependent on consumer spending, particularly on LCD TVs and mobile PCs, this further narrows down the market. Despite the company’s effort to venture into new markets such as solar and automotive, it continues to generate a lion’s share of its revenue from Display and Optical.
It is to be noted that most of Corning’s challenges are execution related, rather than demand-related. Supply constraints, capacity expansion and costs associated with scaling of new solar and gen AI products can put pressure on margin in the near term.
Estimate Revision Trend
Earnings estimates for Corning for 2025 and 2026 have increased over the past 60 days.
Image Source: Zacks Investment Research
Key Valuation Metric of GLW
From a valuation standpoint, GLW is currently trading at a discount compared with the industry. Going by the price/earnings ratio, the company’s shares currently trade at 29.48 forward 12-month earnings, lower than 33.56 for the industry.
Image Source: Zacks Investment Research
End Note
Corning is set to benefit from solid market traction in the AI data center and the consumer electronics market. With its Solar Market Access Platform, the company is rapidly expanding into the growing U.S. solar supply chain. Its strong focus on innovation, financial discipline, and cash flow growth is a positive factor. Upward estimate revision underscores growing investor confidence about the stock’s growth potential.
However, despite strong momentum, the company’s growth will depend on its capability to efficiently match the customer demand with diligent execution and capacity expansion. Weakness in Display Technologies and Automotive remains a concern. With a Zacks Rank #3 (Hold), GLW appears to be treading in the middle of the road, and new investors could be better off if they trade with caution. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Corning Outperforms Tech Sector in 6 Months: Should You Invest?
Key Takeaways
Corning Incorporated (GLW - Free Report) has gained 69.2% in the past six months compared with the communications components industry’s growth of 97.2%. The stock has outperformed the Zacks Computer & Technology sector and the S&P 500’s growth during this period.
Image Source: Zacks Investment Research
It has underperformed its competitor CommScope Holding Company, Inc. (COMM - Free Report) but outperformed Amphenol Corporation (APH - Free Report) . CommScope has surged 136.1%, while Amphenol has gained 45.1% in six months.
Key Growth Drivers for Corning
Corning’s Springboard plan, a strategic initiative focused on generating significant sales growth, driving strong incremental profit and cash flow, is paying off. The initiative aims to realize more than $4 billion in annualized sales by the end of 2026 with an operating margin target of 20% during the same time frame. The company has taken a versatile approach to achieve this.
Along with closely working with its customers and suppliers across the segments, it aims to understand emerging market trends and drive its research and innovation initiatives in that direction. AI data centers, Solar market and consumer electronics remained the major growth engines for the company.
AI data centers require far more fiber connectivity than the legacy ones. Corning’s leading-edge Gen AI fiber and cable systems, which can enable two-to-four times the amount of fiber in an existing conduit, are gaining significant market traction as hyperscalers expand their data center footprint to support surging AI workloads. Corning’s innovative solution reduces the need for the development of new conduits to some extent. Corning’s optical connectivity products are expected to gain from substantial growth in the AI data center market.
Consumer electronics continue to be a stronghold for Corning. Leading manufacturers such as Apple, Samsung, Motorola, HP and Dell are incorporating Corning’s cover materials across their flagship devices. It is also gaining traction in the solar market. Corning is a market leader in semiconductor polysilicon, a material used in the solar industry for wafer manufacturing. It has a polysilicon semiconductor production hub in Michigan, U.S. The company has now built a solar ingot and wafer facility in the region. The colocation has created a vertically integrated manufacturing ecosystem that will strengthen its position in the U.S. domestic solar supply chain.
Along with such a strong focus on innovation, the company is placing strong emphasis on financial discipline. Owing to solid demand trends, the company expects to achieve its 2026 operating margin target one year ahead of plan. During the September quarter, Corning generated $784 million of net cash from operations compared with a cash flow of $699 million in the year-earlier quarter.
Image Source: Zacks Investment Research
Major Challenges for Corning
Demand for Corning’s Gen AI optical products is rapidly growing and may outpace the company’s ability to supply. The company has to allocate capital to expand manufacturing, or else it might lose its customers to competitors like CommScope or Amphenol. AI-related demand can fluctuate for multiple factors. Hence, management is reluctant to increase capacity without customer commitments. If growing capex spending does not translate into higher sales, it will put pressure on profitability and cash flow, negatively impacting investors’ confidence.
In the third quarter, Display segment revenues were down 7% year over year. Although the business remains profitable, growth prospects are affected by macro headwinds and soft end-market demand. Its Automotive business segment is witnessing headwinds owing to weakness in heavy-duty markets, particularly in North America.
End market diversification is limited within the Display and Optical segments, which account for more than half of total revenues. Since the Display Technologies and Specialty Materials segments are largely dependent on consumer spending, particularly on LCD TVs and mobile PCs, this further narrows down the market. Despite the company’s effort to venture into new markets such as solar and automotive, it continues to generate a lion’s share of its revenue from Display and Optical.
It is to be noted that most of Corning’s challenges are execution related, rather than demand-related. Supply constraints, capacity expansion and costs associated with scaling of new solar and gen AI products can put pressure on margin in the near term.
Estimate Revision Trend
Earnings estimates for Corning for 2025 and 2026 have increased over the past 60 days.
Image Source: Zacks Investment Research
Key Valuation Metric of GLW
From a valuation standpoint, GLW is currently trading at a discount compared with the industry. Going by the price/earnings ratio, the company’s shares currently trade at 29.48 forward 12-month earnings, lower than 33.56 for the industry.
Image Source: Zacks Investment Research
End Note
Corning is set to benefit from solid market traction in the AI data center and the consumer electronics market. With its Solar Market Access Platform, the company is rapidly expanding into the growing U.S. solar supply chain. Its strong focus on innovation, financial discipline, and cash flow growth is a positive factor. Upward estimate revision underscores growing investor confidence about the stock’s growth potential.
However, despite strong momentum, the company’s growth will depend on its capability to efficiently match the customer demand with diligent execution and capacity expansion. Weakness in Display Technologies and Automotive remains a concern. With a Zacks Rank #3 (Hold), GLW appears to be treading in the middle of the road, and new investors could be better off if they trade with caution. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.