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Corning (GLW) & Samsung Arm Expand Buyback Deal, Stock Up

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After entering into a series of financial and strategic agreements, Corning Incorporated GLW recently announced that it inked an extended long-term contract with Samsung Electronics’ subsidiary Samsung Display. As part of this new seven-year deal, Samsung Display will convert all its preference shares into 115 million common shares, of which 35 million common stock will be repurchased by Corning.

This buyback will make Samsung Display entitled to an ownership stake of nearly 9%, which is equivalent to possessing 80 million common shares. Markedly, the recent transaction is likely to reinforce the long-standing partnership by benefitting both companies with enhanced operational efficiencies supported by a robust capital structure. Following this significant news update, shares of Corning rose 3.4% during the trading session to close at $45.48 as of Apr 5.

Interestingly, the display technologies trendsetter has been an investor of Corning since 2014. The companies have worked together on multiple projects in the past in relation to OLED and flexible displays that laid the foundation for the previous seven-year agreement reached in 2014. This eventually led to Corning obtaining an absolute ownership of Samsung Corning Precision Materials, Co., Ltd., a joint venture with Samsung Display, which manufactures LCD glass in Korea.

The acquisition enabled Corning to gain full control of its global fusion-glass manufacturing platform, thereby extending its leading position in the specialty glass market. Seven years post the signing of the original pact, the recent buyback will elevate Samsung Display’s stake to 9%, up from 7.5% in 2014.

The latest deal is expected to not only give a major kick to Corning’s business roadmap with an enhanced future performance but also reward its shareholders with lucrative opportunities in the long run. In fact, the agreement is likely to benefit its shareholders with accretive earnings and incremental free cash flow.

Additionally, Corning will emerge as a strong innovation player to Samsung on the back of its best-in-class capabilities and technology collaborations. The initial repurchase is anticipated to close this month with Samsung Display continuing to maintain its interest in Corning until at least 2028.

Moving on, Corning expects to witness a 6-8% sales CAGR and a 12-15% CAGR for earnings per share through 2023 while investing $10-$12 billion in research, development & engineering, capital, and mergers and acquisitions. It also plans to expand its operating margin and return on invested capital, and deliver $8-$10 billion to its shareholders including an annual dividend per share increase of at least 10%.

To achieve its goals, the company expects to add an incremental $3-$4 billion to annual sales and improve its profitability by the end of 2023. It is extending performance under its 2020-2023 Strategy & Growth Framework, and focusing on enriching its product portfolio as well as utilizing financial strength to enhance its shareholder returns. Corning’s capabilities are becoming increasingly vital to diverse industries and multiple opportunities support its leadership across all its market-access platforms.

The stock has soared 131.1% compared with the industry’s growth of 72.4% in the past year.

Corning currently has a Zacks Rank #3 (Hold). It has a long-term earnings growth expectation of 16.1%.

Some better-ranked stocks in the industry are Plantronics, Inc. PLT, Knowles Corporation KN and Ooma, Inc. OOMA. While Plantronics sports a Zacks Rank #1 (Strong Buy), Knowles and Ooma carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Plantronics delivered a trailing four-quarter earnings surprise of 560.4%, on average.

Knowles delivered a trailing four-quarter earnings surprise of 19.3%, on average.

Ooma delivered a trailing four-quarter earnings surprise of 163.7%, on average.

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Corning Incorporated (GLW) : Free Stock Analysis Report

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