Flat-panel televisions, PCs, tablet computers, and smartphones all have something in common: they all use display glass. And Corning is one of the world’s largest suppliers of this glass.Corning is featured in the new issue of Barron’s.
Display glass is responsible for around 45% of the company’s revenue, but accounts for 85% of profits. Corning also makes fibre optic cables used by telecommunications giants to deliver high-speed internet. You may even have a few Corning products in your kitchen: the company makes Pyrex brand measuring glassware.
Corning shares have taken a beating lately. But Barron’s Sandra Ward thinks they’re cheap:
At a recent $15 a share, Corning, the world’s leading maker of specialty glass, carries a stunningly low price/earnings multiple of 7.9 times 2012 estimated earnings of $1.89 a share. The share price is only slightly higher than the company’s book value of $13.79 a share.
Tight supply and an approaching holiday season bode well for Corning:
“It’s very attractive,” analyst Darice Liu of Brigantine Advisors says of Corning’s stock, noting that long-term fundamentals are strong and the valuation is compelling. She sees the shares possibly hitting 18 in the next year, a gain of nearly 20% from current levels. “The supply chain is so tight, that when panel makers pull the trigger and increase utilization and productivity, you’ll see an immediate positive impact,” says Liu.
“The indications are that there will be pretty aggressive pricing for the holidays, and that could drive volume and be a positive for industry growth,” said Paul Semenza, senior vice president at Display Search. “The risk is [inventories] are too lean. If demand spikes, inventories wouldn’t be adequate.” That’s a risk Corning investors might happily take.
For more, read the full feature at Barron’s.