Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why Corning Stock Rose 24% in 2020

By Lee Samaha - Jan 1, 2021 at 9:43AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A recovery is in place, and the company is set to benefit from a pickup in spending on consumer electronics and 5G networking.

What happened

Shares in materials science company Corning ( GLW -0.65% ) rose 24% in 2020, according to data provided by S&P Global Market Intelligence. The year's performance marks a strong recovery from the lows of March. In a nutshell, Corning's sales are recovering and the market is pricing in strong growth in 2021.

Fiber optic cable.

Image source: Getty Images.

Despite the ravages to the global economy in 2020, Corning managed to eke out a 2% year-over-year sales increase in the third quarter. It was driven by a 4% increase in display technologies revenue (OLED and LCD displays for televisions, notebooks, and monitors) and a 23% increase in specialty materials (glass and other materials used in smartphones, semiconductors, and general industrial applications). Both factors helped to offset declines in optical communications (fiber optic and cable), environmental technologies, and life sciences.

So what

The early recovery in sales from consumer electronics is largely a consequence of the onset of a recovery in China. It's something the company hopes to build on in 2021 as the global economy opens up. In particular, Corning stands to benefit from increased investment in 5G networking, an automotive production ramp-up, and a general improvement in industrial activity.

In this context, Wall Street analysts are forecasting an 11.2% increase in sales in 2021, which should result in a 36% increase in earnings per share to $1.87.

Now what

Investors will want to see the positive sales momentum generated in the third quarter feed through into the fourth quarter, and then into 2021. But the longer-term question is whether its profit margins and free cash flow generation from revenue are in some sort of long-term decline due to competition in its industry. 

GLW Revenue (TTM) Chart

Data by YCharts. TTM = trailing 12 months.

If margins are in a long-term decline, then long-term earnings assumptions may need to be dialed down. Alternatively, if margins start rising again, then the opposite holds -- something to keep a close eye on with Corning.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Corning Incorporated Stock Quote
Corning Incorporated
$36.85 (-0.65%) $0.24

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/01/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.