As Corning’s Shares Shatter, the Buying Opportunity Is Clear
Corning is in disaster mode today. But should it be? Let’s looking into the report.
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Corning Incorporated (GLW) released second-quarter financial results, and the stock is down big today. Let’s look at the results, see why shares are sinking, and find out why I might pick up some of the company often referred to on the NYSE trading floor as simply “Glassworks.”
First, the report: Corning revealed adjusted earnings per share of $0.78 (unadjusted EPS of $0.64) on adjusted revenue of $4.738 billion (unadjusted revenue of $4.505 billion). Adjustments were made for $233 million worth of hedged exposures, $131 million worth of restructuring charges and several much smaller items. The adjusted top-line print was good for year-over-year growth of 17% and beat Wall Street’s expectations. The adjusted bottom line number also beat Wall Street, by three cents per share.
“In the second quarter, we delivered outstanding results, and we upgraded our Springboard Plan to grow sales to an annualized run rate of $20 billion by the end of 2026, $30 billion by the end of 2028, and $40 billion by the end of 2030. We’re entering a new phase of accelerating growth, and we expect to deliver a sales CAGR of 19% from Q4 2026 to Q4 2030,” said chair, president and CEO Wendell P. Weeks, in the press release. He added, “We continue to deepen our long-term customer partnerships with industry leaders, most recently with Amazon (AMZN) and Nvidia (NVDA). These partnerships provide strong proof points supporting our exciting Springboard Plan.”
The shares are trading sharply lower, (with a $118 handle) heading into the regular session on Tuesday, down more than 17%. That said, the shares are still up for the year, but way off of their “parabolic” late June high of $271.78.
On Margin
CFO Ed Schlesinger wrote, “In the second quarter, we delivered our ninth consecutive quarter of year-over-year growth and continued to enhance our financial profile. We grew core sales 17% to $4.74 billion and core EPS 30% to $0.78. We expanded core gross margin 120 basis points to 39.6% and core operating margin 190 basis points to 20.9%. We also grew core ROIC 180 basis points to 14.9% and delivered strong adjusted free cash flow of $1.42 billion.”
Segment Performance
– Optical Communications generated net sales of $2.072 billion (+32%), producing a net income of $438 million (+77%).
– Glass Innovations generated net sales of $1.463 billion (+1%), producing a net income of $354 million (+9%).
– Automotive generated net sales of $471 million (+2%), producing a net income of $82 million (+4%).
– Solar generated net sales of $438 million (+90%), producing a net income / loss of $7 million (down from $2 million).
– Life Sciences generated net sales of $294 million (-15%), producing a net income / loss of $21 million (down from $6 million).
Guidance
For the current quarter, Corning is projecting core sales of $4.9 billion to $5 billion, which is a hair below the $5 billion that Wall Street had in mind. This miss is a big reason why the shares are being hit so hard on Tuesday morning. Core EPS is seen at $0.85 to $0.89. That brings the midpoint of that range above the $0.86 that Wall Street was looking for.
Fundamentals
For the period reported, Glassworks generated an adjusted operating cash flow of $1.845 billion. Out of this number came capital spending of $422 million, leaving free cash flow of $1.423 billion (+215%). Out of that number, the company paid out $251 million in cash dividends to shareholders. It did not buy back any common stock for its corporate treasury.
Turning to the balance sheet, GLW ended the period with a cash position of $2.504 billion and inventories of $3.426 billion. That puts current assets at $10.917 billion. Current liabilities add up to $6.021 billion including just $668 million in shorter-term debt. This leaves the company with current and quick ratios of 1.81 and 1.25 respectively. Simply put, Corning can meet its obligations and has a better than decent current situation.
Total assets amount to $32.956 billion. Of that total only about 9% is labeled as either goodwill or other intangibles, which is better than fine. Total liabilities less equity come to $19.829 billion. This includes longer-term debt of $7.756 billion. I don’t love that total debt load relative to the cash position, but it’s not an imminent issue for the balance sheet. This balance sheet is adequate.
My Take
This stock should not be in disaster mode. Performance is strong. Cash flows are robust. Demand is also solid. The balance sheet is at least adequate. Guidance is really not awful. I want to grab a few shares for a trade today.
Readers will see that GLW is feeling around for support this morning close to the stock’s 78.6% Fibonacci retracement level of the November into June rally. Relative Strength and the daily moving average convergence divergence are in awful shape, so I won’t be getting long a chunk.
Losing the 200-day simple moving average will hurt as well as professional managers head for the exits. That said, should the Fib level hold, that same thin red line could act as an accelerant. Remember, a lot of pros rely on algorithms now, so the moves are more robotic, and often enough, easier to predict than they used to be. I’m not saying this game is easy. I’m just saying algorithms are often easier to game than were street kids with a quick mind that grew up in Queens and Brooklyn ever were.
At the time of publication, Guilfoyle was long AMZN, NVDA equity.
