What Happened?
Shares of glass and electronic component manufacturer Corning (NYSE: GLW) jumped 5.4% in the afternoon session after the company posted record third-quarter core sales and earnings, driven by strong demand for its AI-related products, and provided a strong fourth-quarter forecast.
The company's core sales grew 14% and core earnings per share jumped 24% compared to the same period in the previous year. A key driver for this performance was a 58% year-over-year surge in sales within its Optical Communications division, fueled by the adoption of new products for Generative AI. Looking ahead, Corning projected fourth-quarter core sales of approximately $4.35 billion. The company also noted it expected to reach its operating margin target a full year ahead of schedule. Following the strong report, analysts at both JP Morgan and UBS raised their price targets on the stock to $100.
After the initial pop the shares cooled down to $90.18, up 4.3% from previous close.
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What Is The Market Telling Us
Corning’s shares are not very volatile and have only had 5 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The previous big move we wrote about was 1 day ago when the stock dropped 5% on the news that the company reported third-quarter results that failed to impress investors, even though headline numbers met or slightly beat expectations. Corning's adjusted earnings of $0.67 per share and revenue of $4.1 billion were in line with what analysts had forecast. However, a closer look at the results revealed areas of concern. The company's Adjusted EBITDA, a measure of profitability, came in at $998 million, missing analyst estimates by 13.4%. Additionally, its free cash flow margin, which indicates how much cash a company generates from its sales, dropped to 11% from 16.3% in the same quarter last year. The market's negative reaction suggested investors were focused on the weaker underlying profitability and cash generation, leading to a sell-off despite the in-line headline figures.
Corning is up 93.1% since the beginning of the year, and at $90.18 per share, has set a new 52-week high. Investors who bought $1,000 worth of Corning’s shares 5 years ago would now be looking at an investment worth $2,809.
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