How Corning Can Shine Brighter in 2014

The uses for Corning's glass products are endless, but some obvious growth drivers still exist. Find out about them here.

Jan 13, 2014 at 10:30AM

Corning (NYSE:GLW) crushed the stock market in 2013, riding the wave of demand for its high-quality glass products to great success. Even as the company continues to make the most of its lucrative relationship with Apple, however, Corning needs to stay aggressive in building up other business connections in order to grow in as many directions as possible. Along those lines, its evolving collaboration with Samsung (NASDAQOTH:SSNLF) will be crucial in 2014.

Corning's current staple product is its Gorilla Glass, which has ridden the smartphone revolution to great fanfare in recent years. Corning has worked hard to find new applications for the popular product, with innovations designed to make it attractive to customers for completely different uses beyond consumer electronics. Yet better prospects for an even older technology might help boost Corning's profitability in the coming year as well. Let's take a closer look at Corning's prospects for 2014.

Stats on Corning

Average stock target price

$18.74

Full-year 2013 EPS estimate

$1.22

Full-year 2014 EPS estimate

$1.52

Full-year 2013 sales growth estimate

(1.8%)

Full-year 2014 sales growth estimate

27%

Forward P/E

12

Source: Yahoo Finance.

What's next for Corning in 2014?
As you can see above, analysts are dubious that Corning's stock has that much more upside left. Their average stock target rests just 2% to 3% above current levels. Yet with Apple and other key electronics manufacturers having more ambitious price targets, Corning could well piggyback on their success again.

The key driver of growth in 2014 for Corning will be its expanded collaboration with Samsung. With Corning taking control of its Samsung Corning Precision joint venture, the two companies believe that Corning will have greater capacity to serve the needs of the global market with its full range of products, rather than limiting itself to what the joint venture developed itself. Greater access to Asia's display markets could help Corning reverse what has been a troubling trend toward earnings stagnation in the key segment, and Corning believes that earnings growth of an extra 20% in 2014 and 2015 could directly result from the deal.

Glw

Image source: Corning.

But new product innovations will also be of great importance for Corning's growth. One big problem with smartphones from Corning's perspective is that they are small, and so the introduction of Gorilla Glass NBT in touch-enabled notebooks and laptops will take advantage of the greater use of touch-screen technology in computers of all sizes. Similarly, with antimicrobial Gorilla Glass coming, Corning hopes to give itself another key competitive advantage for health-conscious device-buyers who want the latest protection with their mobile devices. Finally, with curved 3-D-shaped Gorilla Glass, Corning could facilitate production of devices like an Apple iWatch or other devices demanding curved surfaces. Just last week, Corning said that it had been chosen as the cover glass for the new Pebble Steel smartwatch.

Another key question facing Corning is whether an uptick in telecom infrastructure spending will spur greater demand for its fiber optic products. Corning was a pioneer in fiber-optic technology, and the telecom segment still represents about a quarter of Corning's overall revenue. With the industry finally starting to see greater capital expenditures, Corning could benefit from a rise in that area.

For Corning in 2014, the overall direction of the technology sector generally will be a key determinant of its success. If investors remain bullish as more electronic devices continue to flood into the market, then Corning could continue to climb sharply from the resulting rise in demand for its components.

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Fool contributor Dan Caplinger owns shares of Apple. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends and owns shares of Apple and Corning. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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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