After enjoying a spectacular 2017, shares of Corning Incorporated (NYSE:GLW) have struggled in the first half of 2018, declining almost 11% year to date. At first glance, this fall is more than understandable: The company has suffered two consecutive quarters of earnings losses and, last quarter, even showed negative free cash flow. However, once investors look under the hood, they can see that some of these concerns might be overblown, and that several catalysts could propel the shares higher in the years to come.

A glass half full

In 2017's fourth quarter, Corning showed a loss due to the new tax law. In Corning's first quarter, it was forced to mark-to-market its currency hedges -- a noncash paper loss since hedging contracts are recorded at current value at the end of each quarter, even though the contracts will only be settled in the future. Also, due to massive capital expenditure spending, free cash flow was depressed in the first quarter. In Corning's first-quarter conference call, transcribed by S&P Global Market Intelligence, management explained that 23 expansion projects were currently underway, including the building of 11 new plants.

A Gorilla Glass advertisement showing a gorilla sitting in a crosswalk looking at a smartphone on the ground

Gorilla Glass covering both sides of smartphones and making inroads in the automotive industry are two trends that might drive sales higher for Corning's tough glass. Image source: Corning Inc.

These expansion projects, management insists, are to fulfill current demand for its products, including optical fiber and Gorilla Glass, Corning's popular covering for consumer electronic devices. As these projects begin to come online, starting in the second half of this year, management believes margins will improve and sales will increase. While Wall Street never likes the uncertainty that comes from spending money today to earn sales tomorrow, this seems a good bet for investors willing to show some patience and wait for a long-term thesis to play out.

Even beyond the near-term catalysts these expansion projects might bring, however, Corning also has other longer-term catalysts in its future. Let's take a closer look at three such trends -- mobile phones in all-glass enclosures, Gorilla Glass use for automobile interiors and exteriors, and Corning's new pharmaceutical glass packaging Valor Glass -- and how they might drive profitable growth for the glass maker.

1. A two-faced Gorilla

In its first quarter, Corning's specialty materials division, the unit responsible for manufacturing Gorilla Glass, saw sales decline by 7% year over year to $278 million. Management listed several reasons for this drop, primarily that sales of Gorilla Glass are largely dependent on product cycles for consumer electronic devices. CEO Wendell Weeks said the company still expects overall sales to increase this year; this will be driven partly by the newest generation of Gorilla Glass, due later this year, and the timing of popular mobile-device launches. More importantly, Weeks said, the company still expects to double sales in mobile consumer electronics despite a maturing smartphone market.

One of the reasons Weeks believes this is possible is because of the growing trend to wrap entire smartphones in glass casings. As Gorilla Glass gets tougher and stronger, it becomes more feasible for manufacturers to exercise this option. For instance, the latest Samsung Galaxy S9 and S9 Plus use Gorilla Glass on the front and back of each phone. The benefits for device makers in going this route are enormous, Weeks said, including better radio-frequency (RF) transparency and wireless charging. As these needs increase, he said, it will be easy to see phones going to all-glass enclosures.

2. Gorilla Glass races to new markets

Gorilla Glass isn't just for phones and wearables, though. In the Q1 conference call, Weeks said the company was currently working with 20 car manufacturers to help equip automobiles with Gorilla Glass on both the inside and outside. Weeks said:

Excitement about car interiors continues to grow. Integrated and interactive displays are becoming a seamless part of the cabin and user experience. Corning is helping OEMs [original equipment manufacturers] with this transition because Gorilla Glass provides a durable, optically advantaged interface surface with tremendous economics. For exteriors, Gorilla Glass laminates are tougher and lighter than conventional auto glass, plus the superior optical quality allows for larger and clearer head-up displays. We believe that our solutions provide compelling value, and we are invested to deliver as the industry transitions to highly connected and autonomous vehicles using Gorilla Glass.

He later said investors could begin to see results in this market in as few as 18 months.

3. The better part of Valor

Valor Glass is Corning's new pharmaceutical packaging which is supposed to dramatically decrease lamella, tiny flakes of glass that can contaminate pharmaceutical products. One of Corning's plants under construction in North Carolina is for the manufacturing of this new product. Valor Glass should also help eliminate cracks and breaks in medicine packaging, translating into less waste for pharmaceutical companies.

Two pharmaceutical industry giants, Pfizer and Merck & Co., have each given the project their blessing; they sent representatives to join Corning at the event in North Carolina when the project's construction was first announced. Weeks said Corning was working closely with the Food and Drug Administration to ensure that Valor Glass gets a speedy approval. He concluded, "We continue to believe Valor has the potential to power Corning's growth through the next decade and beyond."

Watch for a bounce

Corning's shares have not had the best start in 2018, but let's not panic yet. The company is building out capacity almost as fast it can to meet demand for its products and increase margins -- overall, that's not a bad place to be. And beyond the project expansions and new plant openings, Corning sits on the cusp of entering new industries and finding new uses for existing products.

Based on the company's core earnings per share (EPS) of $1.65, shares are currently trading at a price-to-earnings ratio of 17. While that's not exactly cheap, given Corning's struggles in its two most recent quarters, it is still a substantial discount to the S&P 500 index. With all these long-term catalysts in place, I believe it would be a big mistake for investors to sell Corning shares now.

Matthew Cochrane owns shares of Corning. The Motley Fool recommends Corning. The Motley Fool has a disclosure policy.