Corning (GLW) Soars on Joint Venture Buyout, Buyback

NEW YORK (TheStreet) -- Corning (GLW), a manufacturer of liquid crystal display (LCD) glass, announced it has entered into a series of strategic transactions with partner Samsung's Display business, including purchasing the latter's 43% share in a joint venture, Samsung Corning Precision Materials (SCP).

Shares soared on the news, up 14.9% to $17.63 as of 10 a.m. EDT, with 16.9 million shares changing hands, far outpacing its three-month average daily trading volume of 12.8 million.

In addition to the buyout, Samsung agreed to a long-term LCD display glass supply partnership valid through to 2023, and the purchase of a combined $2.3 billion worth of Corning convertible preferred shares, giving it a 7.4% stake in the New York state-based company on an as-converted basis.

"Corning and its shareholders will realize attractive financial returns as the transactions produce immediate earnings accretion through the addition of the remainder of SCP, substantial cost synergies and significant incremental free cash flow," CEO Wendell P. Weeks said in a statement.

The transactions, expected to close first quarter 2014, will add around $2 billion to Corning's annual sales, $350 million in incremental profit before special items, and $500 million to cash flow.

Corning also authorized a $2 billion share repurchase program through end-2015. Corning also pre-announced earnings, due Oct. 30. Corning said it anticipated earnings of 33 cents a share on revenue of $2.1 billion, a 10% year-on-year increase.

TheStreet Ratings team rates Corning Inc as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate Corning Inc (GLW) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins, increase in stock price during the past year and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • GLW's revenue growth has slightly outpaced the industry average of 2.1%. Since the same quarter one year prior, revenues slightly increased by 3.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • GLW's debt-to-equity ratio is very low at 0.14 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 4.24, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for Corning Inc is rather high; currently it is at 56.76%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 32.18% significantly outperformed against the industry average.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • Corning Inc has improved earnings per share by 43.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, Corning Inc reported lower earnings of $1.15 a share vs. $1.76 a share in the prior year. This year, the market expects an improvement in earnings ($1.25 vs. $1.15).