Shares of Corning (GLW +2.00%) fell as much as 11.9% in trading on Tuesday after the company reported second-quarter financial results. Shares are down 8.2% as of 3 p.m. ET.
An earnings beat but a guidance flop
Corning reported a modest 3.4% increase in revenue to $3.6 billion and non-GAAP (adjusted) earnings per share was $0.47, which met analyst estimates. But the company guided for $3.7 billion in revenue and earnings of $0.50 to $0.54 per share, which was below the $0.55 in earnings analysts expected.
The company also announced a deal with Lumen Technologies to sell 10% of its fiber capacity to the company. This will be used to build faster connections between artificial intelligence (AI) data centers. In theory, this should be a long-term growth channel for the company, although 10% of capacity is not a big percentage of the company's revenue.
NYSE: GLW
Key Data Points
Growth is priced in
While modestly better-than-expected results are nice, Corning isn't a high-growth company or a great value for investors. Shares trade for 19 times forward earnings estimates and analysts are only expecting 5.4% growth for the company over the next two years.
Products like AI data centers may get a lot of attention, but I don't think it fundamentally changes the underlying economics of a company like Corning. Manufacturers have had a hard time extracting value from the explosion in tech spending and that continues with Corning. That's why I'm not buying the discount in shares today.
