Pretty Clever, Corning

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

It's not every day you see a company predict a bad earnings miss and then get rewarded with a 12.5% pop in share price. But that's exactly what's happening at Corning (NYSE: GLW  ) this week.

Yesterday, Corning warned investors that because of "a significant supply chain correction, as well as some loss of share, [Corning will soon report Q3 profits] that are at least 30% lower sequentially." In essence, Corning is predicting it will earn $0.34 per share at best in fiscal Q3 -- versus a Wall Street consensus of $0.42. That sounds pretty dire, but the headline is worse than reality. You see, Corning has already been discussing the weakness at investor conferences, so the bad news appears priced in, leaving investors to take a long-term look at the company.

Danger! Horror! Get out!
Whatever its short-term worries, Corning sounds supremely confident in its long-term success --  confident enough that management is committing to buy back $1.5 billion worth of stock, beginning in Q4, when an earnings-inspired sell-off is most likely to commence.

Continuing news of weakness can't be much of a surprise to everyone else up and down the LCD TV supply chain -- from panel makers like LG Display (NYSE: LPL  ) to TV manufacturers such as Sony (NYSE: SNE  ) , all the way down to retailers (Nasdaq: AMZN  ) , hhgregg (NYSE: HGG  ) , and Best Buy (NYSE: BBY  ) . Cautious outlooks and reduced earnings across end TV manufacturers as well as stores specializing in electronics have been common in recent months.

However, even with short-term weakness in televisions, Corning is still bullish on its outlook. According to the company, its consistent cash flow combined with lower planned outlays for capital expansion will make this buyback possible. What's more, with the stock selling for "a significant discount to the real value of Corning’s businesses," management says it will view any decline in stock price as a buying opportunity -- a chance to "protect the corporation ... deliver shareholder value [and] enhance shareholder returns."

I agree. As I argued last month, Corning's long-term growth rate of 11% offers investors a superb bargain. The stock sells for just half the P/E ratio of the average stock on the Dow Jones Industrial Average (INDEX: ^DJI), at share prices of less than 7 times earnings and 11 times free cash flow, and a 2.5% dividend tossed in for good measure. I'm glad to hear now that Corning agrees -- and investors are right to follow its lead by buying the stock.

Will Corning sell off on the news? Will it pop right back up as the buyback gets underway? Add Corning to your Watchlist and find out.

Fool contributor Rich Smith does not own (or short) shares of any company named above. The Motley Fool owns shares of Best Buy. Motley Fool newsletter services have recommended buying shares of Corning,, and hhgregg. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (19)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1565844, ~/Articles/ArticleHandler.aspx, 10/27/2016 1:40:15 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 4 hours ago Sponsored by:
DOW 18,199.33 30.06 0.17%
S&P 500 2,139.43 -3.73 -0.17%
NASD 5,250.27 -33.13 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/26/2016 4:39 PM
^DJI $18199.33 Up +30.06 +0.17%
AMZN $822.59 Down -12.59 -1.51% CAPS Rating: ****
BBY $39.29 Up +0.03 +0.08%
Best Buy CAPS Rating: *
GLW $23.02 Up +0.05 +0.22%
Corning CAPS Rating: *****
HGG $1.73 Down -0.02 -1.14%
hhgregg CAPS Rating: *
LPL $12.98 Up +0.02 +0.15%
LG Display CAPS Rating: ***
SNE $31.84 Down -0.01 -0.03%
Sony CAPS Rating: ***