Corning Stock Price Could Face Headwinds Amid Downside Guidance

Although Corning (NYSE: GLW) stock price regained upside momentum over the last month, the stock price gains look limited due to lower than expected outlook for this year. The stock price rose 10% in the last month following a huge selloff in the last two quarters.

GLW Corning Incorporated daily Stock Chart

The company has presented downside guidance due to lower revenue from optical communications and display technologies units. This is due to weaker demand considering capital spending cuts from several major telecom companies.

Its optical communications revenue is likely to decline in the range of 3%-5% for this year. The company had previously expected low-to-mid-single digit percentage growth. The analysts were expecting optical communications revenue growth by around 4%.

On the other hand, low glass prices could impact its display technologies revenues. It anticipates full-year prices to decline by a low-to-mid single-digit percentage.

Amidst lower sales for the two business segments, the company appears in a position to offer sustainable returns to investors.

It has returned $306 million to investors in the form of dividends and share buybacks. It has also announced a new $5 billion share buyback program. The share buyback program would offer significant support to its earnings, dividends and share price performance.

Corning has returned more than $12.5 billion since 2015. It has increased dividends by 67% and reduced outstanding shares by 37% in the past four years.

Moreover, the company looks optimistic about future returns. At Investor Day the CEO said, “We introduced our 2020-2023 Strategy & Growth Framework. It’s our original Framework evolved for a new growth era. Under it, we plan to invest $10 billion to $12 billion for growth and to return $8 billion to $10 billion to shareholders.”

Despite short-term headwinds for stock price performance, Corning’s looks significantly optimistic about its business strategy. The company expects to generate high single-digit sales growth in the coming years through innovation and investments in inorganic growth opportunities.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.

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