Q3 Earnings

A strong quarter for Corning continues a strong year!  Corning reported their Q3 earnings yesterday (Oct-25-2016).  Some highlights (from seekingalpha, here and here)

Corning (NYSE:GLW): Q3 EPS of $0.42 beats by $0.04.

Revenue of $2.55B (+4.1% Y/Y) beats by $30M.

Results – revenue $2.55B (+4.1% Y/Y, $30M above consensus), EPS $0.42 (+24% Y/Y, +14% Q/Q; $0.04 above consensus)

Segment revenues breakdown – Core Sales for Display Technologies grew 7% Q/Q, 1% Y/Y to $943M, Core Earnings grew 14% Q/Q, 5% Y/Y to $270M. For Optical Communications, Core Earnings were up 14% sequentially and 38% on the year to $98M. Core Earnings for Environmental Technologies declined 5% on the quarter and 8% on the year to $35M. Specialty Materials Core Earnings down 8% Q/Q to $44M, Life Sciences’ unchanged at $21M.

Previously disclosed $2B share repurchase launched during the quarter.

Corning (NYSE:GLW) CEO Wendell P. Weeks: “Corning’s strong third-quarter results reflect the increasing momentum that we expected in the second half of this year. Sales and gross margins increased in every business segment year over year. We also grew the company’s sales, core earnings and core EPS both sequentially and year over year. Our operating results and progress on key growth initiatives continue to reinforce our confidence in Corning’s strategy.”

My Take

 I actually wrote about Corning just over a year ago in one of my first articles on Seeking Alpha. (Article here)

Stock performance has been very lumpy the past few years but I stand by what I saw in the company.  I saw a company with very strong financials, a diverse product base and at that point, a willingness to start return more money to shareholders which they have.  The company had announced another share buyback program and an increased dividend.  Since my original call the stock is up nicely, roughly 26%.

 glw_10252016

Based on where the market has previously assigned a multiple to the company the stock is potentially overvalued.  I want that story line to play out a little bit more after lumpy multiples being assigned over the past twelve years.

 glw_ycharts

Looking at a 10 year Y-Chart, shares outstanding have fallen from 1.7B to just 1B.  Additionally, margins are rich at 25%, free cash flow is generous even having dipped to “only” 933M the past 12 months.  Dividend cover is easy as the total dividends paid has been 653M this past year.

 Finally, at a quick glance using Simple Safe Dividends, I can see how Corning ranks compared to the universe of dividend stocks covered.

glw_ssd

The high safety score of 88 gives me confidence that the company faces no immediate issues paying the dividend as they in aggregate rank higher than 88% of the companies covered.  The growth figure is well above average and comes in the 67th percentile.  Finally, the overall yield ranks right at the mid-way point.

In conclusion Corning has kept doing what it needs to do and stands poised to richly reward shareholders.

Let me know your thoughts in the comments section.

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