Corning’s Q1 Demonstrates Continued Product Demand but Margin Pressures Remain; Maintain $42 FVE

Narrow-moat Corning beat the high end of its top-line guidance range in its first quarter and guided to a strong second quarter. Conversely, Corning continues to face increased input and logistics costs that weigh on profitability even as revenue continues to grow. As such, we’re maintaining our fair value estimate of $42 per share. Corning’s Optical segment continued to be its strongest growth outlet. This aligns with our long-term view that there will be robust demand for optical fiber as data center construction accelerates. To alleviate some margin pressure stemming from inflationary and higher input costs, Corning was able to negotiate increased prices in long-term contracts with its customers and we anticipate this trend to continue throughout 2022. Shares are up around 4% after the release based on positive annual sales guidance, and we continue to view Corning as undervalued.