October 24, 2012
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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