Corning Incorporated (GLW) is At Least Worth Watching (DAKT, SGOC & OLED)

Large cap glass and ceramics technology stock Corning Incorporated (NYSE: GLW) has put in a good performance since announcing a deal with Samsung back in October, meaning its probably time to take a closer look at the stock along with the performance of potential peers (either upstream or downstream on the OLED and liquid crystal display side of the glass business) like small cap players like Daktronics, Inc (NASDAQ: DAKT), SGOCO Group Ltd (NASDAQ: SGOC) and Universal Display Corporation (NASDAQ: OLED). I should note that we have recently added Corning Incorporated to our SmallCap Network Elite Opportunity (SCN EO) portfolio because we believe the company's position as it relates to glass and ceramics puts it in a sweet spot for the next generation flexible screens and mobile wearables. But that's not all there is to like about this stock.

What is Corning Incorporated?

Corning Incorporated is the world leader in specialty glass and ceramics with more than 160 years of materials science and process engineering knowledge that operates in the following five segments:

Display Technologies – Glass substrates for LCD flat panel televisions, computer monitors, laptops and other consumer electronics. Environmental Technologies – Ceramic substrates and diesel filters for emission control systems. Telecommunications – Optical fiber, cable, and hardware and equipment for telephone and Internet communication networks. Life Sciences – Glass and plastic lab ware, as well as label-free technology, media, and reagents for cell culture, genomics and bioprocessing applications. Specialty Materials – Cover glass for consumer electronics, advanced optics and specialty glass solutions for a number of industries.

The company is noted for it's Gorilla Glass product which is used primarily as the cover glass for portable electronic devices such as mobile phones, portable media players, laptop computer displays and some television screens.

As for potential peer comparisons on the OLED and liquid crystal display side, small cap Daktronics is a designer and manufacturer electronic scoreboards, programmable display systems and large screen video displays; the SGOCO Group Ltd is focused on product design and brand development in the Chinese flat panel display market; and Universal Display Corporation is a world leader in the development of innovative organic light-emitting diode (OLED) technology for use in flat panel displays, lighting and organic electronics. So its not a perfect peer comparison but all of these stocks would be on the cutting edge of glass, how glass is used or glass display technology. So we don't know how big of a potential negative.

What You Need to Know or Be Warned About Corning Incorporated?

Back in October, Corning Incorporated announced it would be entering into a series of complex strategic and financial agreements (supposedly structured in a way that will allow it to repatriate overseas cash without paying US taxes according to the Wall Street Journal) with Samsung Display Co., Ltd. where it would obtain full ownership of Samsung Corning Precision Materials Co., Ltd. (SCP), an unconsolidated equity venture with Samsung Display that manufactures LCD glass in Korea. The deal will add about $2 billion to Corning Incorporated's annual sales plus Samsung will receive convertible preferred shares with a face value of $1.9 billion and will make an additional $400 million investment in Corning by subscribing to new convertible preferred shares. Corning Incorporated`s board of directors also authorized an additional $2 billion of share repurchases through December 31, 2015.

At the end of October, Corning Incorporated reported a 10% sales increase to $2.1 billion while Core earnings per share rose 18% to $0.33. The Vice Chairman/CFO reiterated:

"Acquiring full ownership of Samsung Corning Precision should generate strong financial results for Corning. When the deal is complete early next year, we should add approximately $2 billion in annual sales and about $350 million in incremental net income to our bottom line. When combined with our newly announced share repurchase program, Corning should see approximately 20% accretion in fully diluted earnings per share."

In the earnings call transcript (available on Seeking Alpha here), the Vice Chairman/CFO was asked whether Corning Incorporated could declare victory on pricing and he responded by saying:

"On pricing for LCD glass, I don't think you can declare permanent victory. We have to remain ever vigilant about this."

However, shares of Corning Incorporated were slipping in early November after sapphire and polysilicon maker GT Advanced Technologies Inc (NASDAQ: GTAT) announced that it had made a multi-year supply agreement to supply sapphire to Apple who currently uses sapphire materials in the fingerprint sensor on its new iPhone 5S while both LG and Apple also use sapphire for lens covers in their smartphone cameras. The tough and scratch-resistant nature of the material would make it potential choice to cover an entire smartphone or tablet screen - the current sweet spot for Corning Incorporated's Gorilla Glass. In fact, Andrew Huang of Sterne Agee thinks the announcement  increases the likelihood that Apple will replace Gorilla Glass with sapphire, a negative for Corning Incorporated. But it should also be noted that does not break out precise revenue figures for Gorilla Glass.

Otherwise, Corning Incorporated announced an accelerated share repurchase agreement (ASR) with JPMorgan Chase Bank to repurchase $1 billion of the company`s common stock. This accelerated share repurchase agreement is part of Corning`s $2 billion share repurchase program announced April 24, 2013.

Share Performance: Corning Incorporated vs. DAKT, SGOC & OLED   

Hot Safest Stocks For 2014

On Monday, Corning Incorporated fell 0.53% to $17.02 (GLW has a 52 week $11.75 to $18.07 a share) for a market cap $24.63 billion plus the stock is up 34.9% since the start of the year and up 99.3% over the past five years. Here is a look at the performance of Corning Incorporated verses that of Daktronics, SGOCO Group Ltd and Universal Display Corporation:

As you can see from the above chart, small cap Universal Display Corporation has outperformed followed by large cap Corning Incorporated.

Finally, here is a look at the latest technical charts for all four stocks:

The Bottom Line. New investors may have already missed out on the biggest short term gains sparked by the Samsun deal. However and at the very least, Corning Incorporated deserves a place on your investor watch list of potential long term investments. 

SmallCap Network Elite Opportunity (SCN EO) has an open position in GLW. To find out what other open positions SCN EO currently has, and to learn why so many traders and investors are relying on this premium subscription service, click here to find out more.