Corning Earnings: Weak Short-Term Demand Lowers Our Valuation, but Shares Are Cheap

We lower our fair value estimate for shares of narrow-moat Corning to $35, from $39, after management guided fourth-quarter results lower than our expectations. Corning’s reported results in the third quarter were weak, but within our expectations, as the firm continues to see softer demand for its optical fiber, which is its largest segment. We now expect this segment to stay at these depressed levels for at least two more quarters. On the bright side, we like Corning’s focus on improving profitability and cash flow while it waits for volumes to return. Despite our fair value cut, we continue to view the market as overly punitive toward Corning shares and see the stock as a buying opportunity for investors. We fully expect the company to recover from its current downcycle. Long term, we believe it is positioned for diversified growth, fueled by its centralized research and development budget that we see giving the firm a cost advantage.