When I last visited Corning
) on Oct. 14 I said that the stock
, then trading at $13.49, was cheap enough to buy but might get even cheaper. (Corning is a member of my long-term Jubak Picks 50 portfolio.)
Well, it has. The stock was trading Wednesday afternoon at $13.21. And it might be headed even lower.
Tuesday morning at a Credit Suisse conference, the company announced the bad news that everybody was more than half expecting from the LCD glass business.
In the fourth quarter, Corning expects LCD glass volume to climb just 5% to 10% from the third quarter versus its original guidance of 20% volume growth.
The lower volumes are a result of lower retail sales of LCD televisions, higher glass inventories at manufacturers, and smaller orders. In October, U.S. retail sales of LCD TVs grew by just 4% -- down from 13% growth in September.
With lower demand comes lower prices. Prices will fall more than the company had previously
expected, and that will take earnings down 30% versus the original guidance for a 5% decline.
Corning isn’t thinking that this will be a momentary blip either. The company said it was taking
action in the current quarter to reduce its glass capacity.
But do remember that Corning recently increased its dividend by 50% so the company doesn’t
think this slowdown will last forever either. (For more on dividend stocks and big dividend
I think the 11% drop of the last day and a half could be extended a bit. The company doesn’t report fourth-quarter earnings until Jan. 25 and until it does report, the fear of an earnings miss will hang over the stock. The bottom of the 52-week range is $11.51 and I wouldn’t mind picking shares up near there. I’m going to add the stock to my watch list
while I wait.
At the time of this writing, Jim Jubak didn't own shares of any companies mentioned in this post in personal portfolios. The mutual fund he manages, Jubak Global Equity Fund (JUBAX), may or may not own positions in any stock mentioned. The fund did not own shares in Corning as of the end of September. For a full list of the stocks in the fund as of the end of the most recent quarter, see the fund's portfolio here.