Will Corning Be Able to Sustain Momentum Amid Headwinds?

Corning Inc. GLW has impressed investors with its recent earnings streak, having surpassed estimates in each of the four trailing quarters. Further, the company’s leading position in glass substrate industry and strength in fiber optic solutions business bode well for future growth.

We believe that its notable traction across markets will drive growth in the upcoming quarters.

Factors to Consider

Corning is a leading innovator in the glass substrate industry. The company has been developing formulations that are not only suitable for imparting superior picture quality, but are also taking care of their effects on the environment. The company’s generation 10 substrates use the proprietary EAGLE XG formulation, which serves both these purposes.

Notably, its upcoming Iris glass also presents significant growth opportunity. We believe that the product portfolio strength along with moderating price decline bodes well for Corning in the long term.

Also, the company’s fiber optic solutions business is likely to be driven by multiple factors.  This includes increasing use of mobile devices that require efficient data transfer and efficient networking systems. Supporting this trend is the proliferation of clouds, which is now resulting in increased storage and even computing on a virtual plane.

Since both consumers and enterprises are using the network more, there is tremendous demand for quality networking. We believe that the expanding fiber optic market is likely to drive its growth in the long haul.

In the past six months, the Zacks Rank #3 (Hold) company’s shares have appreciated 11.2% against the industry’s average decline of 2.6%.

However, we expect prices to remain a drag on margin. Also, we believe that price erosion would accelerate in any adverse market situations, such as the recent recession or temporary periods of over-supply.

Stocks to Consider

Some better-ranked stocks from the same space are Arista Networks, Inc. ANET, Amphenol Corp. APH and Apptio Inc. APTI While Arista Networks sports a Zacks Rank #1 (Strong Buy), Amphenol and Apptio carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Arista Networks surpassed estimates in each of the trailing four quarters, the average positive earnings surprise being 13.35%.

Amphenol surpassed estimates in each of the trailing four quarters, the average positive earnings surprise being 5.28%.

Apptio outpaced estimates in each of the preceding four quarters, the average earnings surprise being 100.00%.

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