Why Corning Shares Went Bananas

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Gorilla Glass maker Corning (NYSE: GLW  ) slumped as much as 11% following the release of its third-quarter earnings results.

So what: Just because Corning has a well-diversified business, that doesn't mean it's immune to deteriorating profits. For the quarter, Corning reported a 2% decline in revenue to $2.04 billion and recorded a profit of $0.35 -- down notably from the $0.51 reported in the year prior. Furthermore, Corning suggested that it could be reducing its headcount to cut costs, resulting in restructuring charges totaling up to $50 million in the upcoming quarter.

Now what: Yikes! The key points here are that Corning is still profitable, still paying out a dividend, and still deriving its revenue from six business segments, which does provide a bit of revenue stability. However, the need to reduce headcount to cut expenses does raise a yellow caution flag. On paper, Corning makes a lot of sense, as its Gorilla Glass is becoming a staple in smartphones and tablets; however, its inability to control margins is a growing concern in the present. For those looking long-term, I suspect you'll find good value with Corning, but not all of my colleagues will agree with that assessment.

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Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool owns shares of Corning. Motley Fool newsletter services have recommended buying shares of Corning. Try any of our Foolish newsletter services free for 30 days. 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.


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  • Report this Comment On October 25, 2012, at 2:46 AM, chris293 wrote:

    With GLW's high difference between the costs and income causing the low net margins I would think that some things may be suspect and out of line when compared to their peers.

    This is a great company that stays ahead of the pack by being R&D minded and first class products that are needed by the world.

    Corning is going to pop when the economy picks up.

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