Corning, inc. GLW fin

Important disclosures appear on the last page of this report.
The Henry Fund
Henry B. Tippie School of Management
Ashutosh Kumar Jha [ashutoshkumar-jha@uiowa.edu]
Corning Incorporated (GLW) March 11, 2015
Information Technology – Electronics Components Stock Rating Hold
Investment Thesis Target Price $24.00-$26.00
Corning, Inc. is well positioned to remain a market leader, however its success
is largely dependent on profits from its Display Technologies segment. The
growth in volume in the display segment is largely offset by decline in average
selling prices. We recommend HOLD rating for Corning Inc. (GLW) with a mean
target price of $25, which provides 8.23% upside from its current market price
of $23.10.
Drivers of Thesis
 Demand for larger screen sizes. Increase in TV sizes drove sales in glass
market in 2014, with screen sizes of 50-inch and more growing as much as
50%. We expect the trend to continue. We expect the decline in average
selling prices of devices to remain moderate (2%) in 2015.
 Demand for Corning’s fiber optic solutions. Wireless Distributed Antenna
Systems and data centers are expected to grow at 14% and 10% CAGR
respectively, from 2014 to 2018. Fiber–to–the-home (FTTH) network is
growing at 9% per year. We expect these factors to generate steady
demand for fiber optic solutions which will drive Corning’s growth in
Optical Communications segment.
 Growth possibilities in automotive market. There has been increasing
trend of use of Gorilla Glass in automobile industry, which is believed to be
a $7 billion market (5.5 billion square feet). Considering total Gorilla Glass
market currently is just around 1 billion square feet, this will serve as a long-
term driver for the Specialty Material segment.
Risks to Thesis
 Continued pricing pressure in LCD industry. The decline in average selling
prices offsets the growth in volume shipments and restricts the revenue
upside for Display Technologies segment.
 Threat of breakthrough innovations. Although Gorilla Glass is currently
market’s preferred choice, any breakthrough innovations such as sapphire
can compromise its competitive advantage and result in loss of contracts
and market share for Display and Specialty Materials segments.
 Weaker demand for ultra high-definition television than expectation.
Henry Fund DCF $24.36
Henry Fund DDM $20.97
Relative Multiple $32.00
Price Data
Current Price $23.10
52wk Range $17.03 – 25.16
Consensus 1yr Target $24.13
Key Statistics
Market Cap (B) $31.28
Shares Outstanding (M) 1271.00
Institutional Ownership 78.7%
Five Year Beta 1.29
Dividend Yield 2.0%
Est. 5yr Growth 4.7%
Price/Earnings (TTM) 1..53
Price/Earnings (FY1) 1.55
Price/Sales (TTM) 3.20
Price/Book (mrq) 1.60
Profitability
Operating Margin 18.8%
Profit Margin 25.5%
Return on Assets (TTM) 8.4%
Return on Equity (TTM) 11.6%
Earnings Estimates
Year 2012 2013 2014 2015E 2016E 2017E
EPS $1.10 $1.35 $1.82 $2.06 $2.09 $2.37
growth -39.02% 23.33% 34.78% 12.94% 1.43% 13.68%
12 Month Performance (Source: Factset) Company Description
Corning Incorporated is a world leader in the
manufacture of specialty glass and ceramics.
Corning creates and makes components that
enable high-technology systems for consumer
electronics, mobile emissions control, optical
communications and life sciences. Corning
operates in five reportable segments: Display
Technologies, Optical Communications,
Environmental Technologies, Specialty Materials
and Life Sciences. Corning manufactures and
processes products at approximately 90 plants in
17 countries.
15.5
11.6
9.0
16.5
12.0
9.7
17.3
20.1
10.9
0
5
10
15
20
25
P/E ROE EV/EBITDA
GLW Industry Sector
-10%
0%
10%
20%
30%
M A M J J A S O N D J F
GLW S&P 500

EXECUTIVE SUMMARY
Demand for bigger screens and 100% consolidation of
subsidiary Corning Precision Materials were primary driver
of Corning’s strong 2014 results. However, in 2015, the
segment will have to deal with tough year-on-year
comparisons. Consumers are trading up to larger screen
sizes due to their declining prices and greater viewing
pleasure. LCD glass demand will likely remain low
sequentially in the first quarter due to weak retail demand
in the second quarter and fewer shipping days in February
but volumes should be higher year-on-year, reflecting the
growth in demand for larger screen LCD televisions. We
expect price declines to remain moderate going forward.
In future ultra high-definition televisions, which have
higher average screen size, higher resolution and more
pixels is expected to become a major growth driver of the
glass market. This will improve Corning’s dollar content
from Display Technologies segment.
Increasing use of connected devices, emergence of cloud
environment and change in pattern of data consumption
(around 50% data used for video content) will promote
demand for efficient network. Global data is estimated at
4.4 trillion Gigabytes and is expected to double every year.
Number of connected devices is expected to reach 19
billion mark by 2018. Wireless Distributed Antenna
Systems are expected to grow at 14% CAGR from 2014 to
2018. Data centers are expected to grow at 10% CAGR
from 2014 to 2018. Fiber–to–the-home (FTTH) network is
growing at 9%. We expect these factors to drive Corning’s
Optical Communication segment in next few years.
There has been increasing trend of use of Gorilla Glass in
automobile industry, which is believed to be $7 billion
market. Corning Gorilla Glass for automotive can be used
in all openings of a vehicle, including windshields,
sidelights, sunroofs, and backlights. It can also be used in
automotive interior touch panels. If Corning can secure a
contract from certain car manufacturer for Gorilla Glass,
that will serve as a long-term driver for the Specialty
Material segment. Increase in number of heavy duty and
light duty vehicles and restriction on emissions will create
increased demand for Corning’s Environmental
Technologies segment products.
As most of Corning’s profitability and cash flow is
dependent of Display Technologies segment, the decline
in LCD prices is a major concern. Due to consumers’ trend
of shifting to lower end devices in emerging markets, there
is constant pricing pressure on devices manufactures, who
then transfer this pressure on panel makers and glass
manufacturers in order to save margins. This decline in
average selling prices offsets the growth in volume
shipments and restricts the revenue upside for Display
Technologies segment. Also GLW is trading at price near
52 week high, providing 6% upside to target price. For
these reasons we recommend a HOLD rating for Corning,
Incorporated.
COMPANY DESCRIPTION
Corning Incorporated is a world leader in the manufacture
of specialty glass and ceramics. Corning creates and makes
components that enable high-technology systems for
consumer electronics, mobile emissions control, optical
communications and life sciences.
Source: Corning Inc. 10k, 2014
Corning operates in five reportable segments: Display
Technologies, Optical Communications, Environmental
Technologies, Specialty Materials and Life Sciences.
Corning manufactures and processes products at
approximately 90 plants in 17 countries.
Display Technologies
Corning’s Display Technologies represented 39.64%, 32%
and 36.34% of the total revenue in 2014, 2013 and 2012
respectively. Despite the fact that this segment represents
less than 50% of revenue, this segment is clearly the
primary driver for profitability and cash flow for the
company, considering that it represented 77.13% of total
39.64%
27.30%
11.24%
12.40%
8.87%
0.55%
2014 Revenue- Segment
Distribution
Optical
Communications
Environmental
Technologies
Specialty Materials
Life Sciences
All Other

net income for 2014. This number for 2013 was 74.85%.
This segment manufactures glass substrates for active
matrix liquid crystal display (LCDs) that are used primarily
in LCD televisions, notebook computers and flat panel
desktop monitors.
Source: Corning Inc. 10K, 2014
Through the end of 2013, the Display Technologies
segment also included the equity affiliate Samsung
Corning Precision Materials Co., Ltd, of which Corning
owned 57.5% and Samsung Display Co., Ltd. owned 42.5%.
In January 15, 2014 Corning obtained full ownership of
Samsung Corning Precision Materials. This organization,
named Corning Precision Materials, was integrated in
Corning’s Display Technologies. Also, Corning and
Samsung Display extended their long-term LCD display
glass supply agreement through 2023. LCD glass
manufacturing is a capital intensive business. Important
attributes for success include efficient manufacturing,
access to capital, technology know-how, and patents. As
a result of the transactions with Samsung Display, Corning
expects to realize increased flexibility in glass-melting
capabilities, which will allow the company to re-evaluate
the need for major capital expenditures for additional
fusion glass manufacturing assets.
Corning’s Display Technologies segment is at the top of the
supply chain. LCD panel makers are the primary customers
for this segment, who use the LCD substrates to create LCD
panels. These panels are then supplied to consumer
electronics manufacturers who use it in their products.
As LCD glass generates significant amount of the
company’s profits and cash flow, any events that adversely
affect the market for LCD glass substrate could have a big
impact on the company’s performance. These events
could include loss of patent protection, increased costs
associated with manufacturing, decline in prices of LCD
glass substrates, decline in average prices of LCD panels or
electronics appliances using LCD glass, decrease in
demand of consumer electronics leading to overcapacity
of LCD, and increased competition from the introduction
of new, and more desirable products. Additionally,
emerging technologies could replace or reduce the
amount of use of glass substrates for certain applications,
including display glass, cover glass and others, resulting in
a decline in demand for the products.
Source: DisplaySearch
Primary drivers of revenue for this segment are Corning’s
market share in terms of % of total revenue of the LCD
industry, total number of LCD shipments and Average LCD
price per shipment. Thus, this segment is heavily
dependent on end products (consumer electronics) supply
and demand. The segment is also positively impacted by
increase in amount of glass substrates used in those end
products. The growth of screen sizes of television was the
main driver for profitability during 2014. As the demand
for larger screen size goes up, on one hand company
benefits from extra volume sales and on the other hand it
is able to reduce cost due to economies of scale.
Steady decline in average selling prices (ASPs) of its end
products such as televisions, tablets, notebooks etc. is
77.13%11.55%
10.25%
8.11%
4.00%
-11.04%
2014 Net Income (Loss)-
Segment Distribution
Display
Technologies
Optical
Communications
Environmental
Technologies
Specialty Materials
Life Sciences
All Other
$31.50
$32.00
$32.50
$33.00
$33.50
$34.00
$34.50
2350
2400
2450
2500
2550
2600
2650
2700
2750
2015 2016 2017 2018 2019 2020
Display Technologies Drivers
Total number of LCD shipments (Millions)
Average LCD price per shipment

another factor which impacts the revenue for this
segment.
There are two primary reasons for this decline. First, this
segment operates in emerging markets primarily in Asian
countries such as China, Taiwan, Japan and Korea. Local
companies in these regions are emerging to provide strong
competition to global brands. Consumers are showing
trend towards shifting to lower end devices. This puts lot
of pressure on global manufacturers to reduce prices.
When they eventually reduce prices their margins become
narrow and then they put pressure on panel makers to
reduce prices. This chain continues till it reaches the glass
substrates manufacturers. Second, this industry is cyclic in
nature. The demand is not consistent and as a result the
supply chain often faces problems such as over capacity
and scarcity. While both can lead to price volatility,
overcapacity has a negative impact on revenues as the
ASPs tend to go down.
Moving forward in 2015 this segment will benefit from
increasing synergies from the consolidation of Corning
Precision Materials. The Segment should also benefit from
increase on the number of TV shipments and the increase
in average screen sizes. According to management, the
demand in 2015 is expected to remain from steady to
decreasing slightly. But according to DisplaySearch
PriceWise published in February 2015, the demand
currently in the market is week and the inventories are
piling up in the supply change which can potently lead to
reduced average selling prices. Panel makers (customers
of Corning) sell their panels in US dollars and are
benefitting from recent weakening of Japanese Yen and
operating margins of Corning’s competitors are such that
they cannot afford to lower prices any more if they intend
to remain profitable. These are the reasons for us to
believe that price decline will only be moderate. We
expect that the decline in the average selling prices would
be moderate in 2015 and the revenue from this segment
in 2015 will decrease by 2% as compared to 2014.
We expect Corning’s LCD market share in terms of % of
revenue to remain steady and increase gradually from
4.65% in 2015 to 4.71% in 2020. We expect the total
number of LCD shipments to increase at 1.61% CAGR from
2015 to 2020 and average LCD price per shipment to
increase at 1.11% CAGR from 2015 to 2020. We expect
revenue for this segment to increase at 3% CAGR from
2015 to 2020.
Optical Communications
Corning’s Optical Communications represented 27.30%,
30% and 26.61% of the total revenue in 2014, 2013 and
2012 respectively. But this segment represented only
11.55% of the total net income in 2014. Optical
Communications segment has evolved from being a
manufacturer of optical fiber and cable, hardware and
equipment to being a comprehensive provider of industry-
leading optical solutions across the broader
communications industry. This segment, previously known
as Telecommunications, is divided into two segments: 1)
Carrier network and 2) Enterprise network.
The carrier network product group consists primarily of
products and solutions for optical-based communications
infrastructure for services such as video, data and voice
communications. The enterprise network product group
consists primarily of optical-based communication
networks sold to businesses, governments and individuals
for their own use. Carrier network product portfolio
consists of optical fiber products which are used in
submarine networks, long-haul, regional and metropolitan
networks, and fiber-to-the-home (FTTH) network
applications.

Corning has a full complement of operator-grade
distributed antenna systems (DAS), including the recently
developed Optical Network Evolution (ONE) wireless
platform. The ONEprovides virtually unlimited bandwidth,
and meets all the wireless service needs of large-scale
enterprises at a lower cost than the typical DAS solution.
Optical Communications segment customers’ purchases of
products are affected by their capital expansion plans,
general market and economic uncertainty and regulatory
changes, including broadband policy. Sales in the Optical
Communications segment are expected to be impacted by
the pace of fiber-to-the-premises deployments. This
segment sales will be dependent on planned targets for
homes passed and connected. Changes in its customers’
deployment plans could adversely affect future sales.
Bandwidth demand continues to driver this segment. The
profit growth is driven by innovation, operations scale and
complementary acquisitions. Data Creation/Consumption,
Data Processing and Data Traffic are primary drivers
moving forward. Global data is estimated at 4.4 trillion
Gigabytes and is expected to double every year. This rise
in data not only drives the sales of various devices, such as
mobile phones which are growing in number and are
expected to reach 10 billion mark by 2018, but also call for
increase in number and coverage of wireless networks.
Wireless DAS are expected to grow at 14% CAGR from
2014 to 2018.
Another primary driver for this segment will be Data
processing which requires increased number of data
centers. Expectation is that by 2018, 40% of data will move
in to the cloud and as data centers are vital for this
technology, numbers of data centers will grow increasing
the demand for products of Corning’s Optical
Communications segment. Data centers are expected to
grow at 10% CAGR from 2014 to 2018. Corning’s
completed the acquisition of TR manufacturing in January
2015. This provides them access to Hyperscale segment.
Hyperscale is also expected to grow at 15% CAGR from
2014 to 2018.
Also, the global IP traffic is expected to increase by 50% by
2018. The number of connected devices in 2018 is
expected to be around 19 billion. It is estimated that there
would be 240 million homes connected by fiber-to-the-
home (FTTH) network. FTTH is growing at 9%. This heavy
data traffic will provide growth for Optical
Communications segment. This growth in FTTH is driven by
heavy North America deployments. We expect the
revenue from Optical Communication segment to increase
by 10% in 2015. We expect this segment to grow at 4%
CAGR from 2015-2020.
Recently, the net neutrality bill was passed, which meant
internet service providers (ISPs) will not be able to use
variable pricing models. We expect this will affect the
motivation level of ISPs to provide high speed networks as
they will not be able to retain the same margins they used
to have when they could charge customers according to
their usage of data. This margin cut could potentially
impact the optical fiber suppliers such as Corning’s Optical
Communications segment.
Environmental Technologies
This segment represented 11.24% of total revenue and
10.25% total net income in 2014. Corning’s Environmental
Technologies segment manufactures ceramic substrates
and filter products for emissions control in mobile and
stationary applications around the world. As global
emissions control regulations tighten, Corning has
continued to develop more effective and durable ceramic
substrate and filter products for gasoline and diesel
applications.
Corning manufactures substrate and filter products in New
York, Virginia, China, Germany and South Africa. Corning
sells its ceramic substrate and filter products worldwide to
catalyzers and manufacturers of emission control systems
who then sell to automotive and diesel vehicle or engine
manufacturers. Although most sales are made to the
emission control systems manufacturers, the use of
Corning substrates and filters is generally required by the
specifications of the automotive and diesel vehicle or
engine manufacturers.
Moving forward the primary drivers for this segment are
going to be Vehicle production, Advancing Regulations and
innovations. According to IHS Automotive Jan.2015,
growth in global regulated vehicles in heavy duty and light
duty segments is expected to be 13% CAGR and 4% CAGR
from 2014 to 2018 respectively. To ensure compliance
with emission standards, automobile manufacturers
resort to the use of emission control systems.
As these standards get even stricter, automobile
manufacturers have to upgrade to newer and effective
emission control systems in order to remain compliant.

This has a positive impact on the automotive exhaust
systems market, which includes manufacturers of
automotive substrates and filters. In September 2014, the
European Union implemented Euro 6 emission standards
for both gasoline and diesel engine vehicles. Though is not
much change for gasoline vehicle emission norms from the
Euro 5, the Euro 6 standards for diesel engines have
become very stringent. This is one of the primary reasons
why Corning is scaling up the production of its diesel
engine emission filter, Corning Dura Trap AT HP.
The U.S. will be implementing its Tier 3 emission standards
for light-weight vehicles starting 2017, which requires a
75% reduction in emissions. For heavy-duty vehicles such
as trucks and buses, it presently follows the 2007 Heavy
Duty Highway Rule. Also for light-duty vehicles, China
implemented its China IV emission standards in July 2013
and is working towards implementing China 5 standards
nationwide by January 2018. For heavy-duty vehicles,
China is currently following the China IV emission
standards and plans to roll out the China 5 standards soon.
These regulations presents a global growth opportunity for
Corning’s Environmental Technologies, which primarily
generates its revenues from automotive and diesel filters.
At present, Corning occupies close to 3% of the automotive
exhaust systems market.
Innovations and process improvements have helped this
segment to grow and cut costs. Increased process rate,
yield, material and labor utilization have helped this
segment to double output on existing heavy-duty assets
from 2010 to 2014. Corning FLORATM
substrates was
selected by Honda Motor Company for model year 2016
platform. The segment will look to partner with leading
OEMs in 2015 and management believes that there would
be more platform wins in 2015.
In 2015, we expect the revenue from this segment to grow
by 1%. This is mainly because the growth from increased
volume sale will be offset by weaker Euro and new plant
depreciation. Without foreign currency effects the growth
would have been 6%. We expect this segment to grow at
3% CAGR from 2015-2020.
Specialty Materials
Corning’s Specialty Materials represented 12.40% and
8.11% of the total revenue and total net income in 2014
respectively. The Specialty Materials segment
manufactures products that provide more than 150
material formulations for glass, glass ceramics and fluoride
crystals to meet demand for unique customer
needs. Consequently, this segment operates in a wide
variety of commercial and industrial markets that include
display optics and components, semiconductor optics
components, aerospace and defense, astronomy,
ophthalmic products, telecommunications components
and cover glass that is optimized for portable display
devices.
Corning’s cover glass, known as Corning Gorilla Glass, is a
thin sheet glass designed specifically to function as a cover
glass for display devices such as tablets, notebook PCs and
mobile phones. Elegant and lightweight, Corning Gorilla
Glass is durable enough to resist many real-world events
that commonly cause glass failure, enabling exciting new
applications in technology and design. In the fourth
quarter of 2014, Corning announced its latest
breakthrough innovation in consumer electronics material
design, Corning Gorilla Glass 4, which delivers the highest
damage resistance performance versus all alternative
compositions, and has the capability to significantly
improve device drop performance. Corning Gorilla Glass is
manufactured in Kentucky, South Korea, Japan and
Taiwan.
In 2014, Specialty Materials segment improved revenues
by $35 million, driven by an increase in sales of advanced
optics products. Corning Gorilla Glass sales remained
consistent with the prior year, with volume increases
offset by an unfavorable shift in product mix and price
declines. There are several drivers for this segment. Touch
devices are one of the major driver.
Number of Touch Devices (Billions)
Source: International Data Corporation (IDC)

The growth in volume unit shipment of devices such as
smartphones, tablets etc. will see increased demand for
Corning’s Gorilla Glass. Another driver for this segment
would the increase in smartphone average screen size.
According to IHS, the average screen size of smartphones
is expected to increase from 5.5 inches in 2014 to 6.5
inches in 2018.
Smartphone Average Screen Size (Inch)
Source: DisplaySearch, IHS
The cover glass market was expected to grow at 13% CAGR
from 2013 to 2016 according to Corning Analysis. Also,
Corning has gained additional share in cover glass market,
mainly because of emergence of touch enabled Notebook
market. These all factors will lead to more demand for
Corning’s Gorilla Glass in coming days. Corning should also
benefit from its extensive marketing efforts in Chinese
market to improve brand awareness.
Cover Glass Market Shipment (Million ft2
)
Source: Corning Inc., Analysis
Specialty Material segment is also dependent on demand
from emerging Asian markets specially China. Due to
emergence of local brand in those regions, consumers are
shifting to low end devices, which is putting pressure on
global brands to reduce prices. When the device
manufacturers cut prices, their margin reduce and they
then try to negotiate with specialty material
manufacturers. This leads to decline in average selling
prices of materials, which limits the revenue growth for
company such as Corning. But as Corning introduced
Gorilla Glass 4 in fourth quarter of 2014, we expect that
the prices would not decline much in 2015, as historically
it has been observed that initially new technologies have
been able to sustain high prices before eventually the price
declines over time.
Due to the superior performance of Gorilla Glass 4,
Corning will have the pricing power. Corning has also made
some progress on increasing its share in smartphones
market in China and at the same time has maintained its
own share against aluminosilicate glass competitors on
devices. We expect the revenue from this segment to grow
by 10% in 2015. Over the period of 2015-2020, we expect
this segment to grow at 4.5% CAGR.
Life Sciences
Corning’s Life Sciences segment represented 8.87% and
4% of the total revenue and total net income in 2014
respectively. Life Sciences laboratory products include
general labware and equipment, as well as specialty
surfaces, media and reagents that are used for cell culture
research, bioprocessing, genomics, drug discovery,
microbiology and chemistry. Corning sells life science
products under these primary brands: Corning, Falcon,
PYREX, Axygen, and Gosselin. The products are marketed
worldwide, primarily through distributors to
pharmaceutical and biotechnology companies, academic
institutions, hospitals, government entities, and other
research facilities. Corning manufactures these products
in the United States in Maine, New York, New Jersey,
California, Utah, Virginia, Massachusetts and North
Carolina, and outside of the U.S. in Mexico, France, Poland,
and China.
Research is primary driver of this segment. In developed
markets, research is growing at 2%, slowed by flat
government funding. In emerging markets, research is
growing at 8%, mainly driven my China. This segment also
will be affected by weaker Euro. We expect this segment

revenue to grow by 2% in 2015. Also, we expect this
segment to grow at 1.7% CAGR from 2015-2020.
Other Corporate Investments
Corning has a 50% equity interest along with The Dow
Chemical Company in Dow Corning Corporation, a
company that manufactures silicones products globally.
Corning’s net income includes equity earnings from
affiliated companies. For the year ended December 31,
2014, Corning recognized $266 million of equity earnings,
of which approximately 95% came from Dow Corning. Dow
corning is also the majority owner of Hemlock
Semiconductor Group, which produces high purity
polycrystalline silicon for the semiconductor and solar
energy industries. Corning also has a 50% equity interest
along with PPG Industries in Pittsburg Corning Corporation
(PCC), a company that manufactures glass products for
architectural and industrial uses and a 50% investment in
Pittsburgh Corning Europe N.V. (PCE), which is a Belgian
Company that manufactures glass products for industrial
uses primarily in Europe.
Polysilicone demand is growing as solar customers are
expected to buy Polysilicone to fulfill their annual contract
commitments. But some of the growth will be offset by
increasing raw material prices. Silicone business sales is
expected to remain consistent but lower tax rate and
lower operating expense should increase profitability. We
expect 10% growth year over year in revenues from Dow
Corning.
RECENT DEVELOPMENTS
GTAT files for Bankruptcy
One of Corning’s major customers, Apple Inc., was
considering replacing Corning’s Gorilla Glass with Sapphire
in its most popular product iPhone. Apple loaned $439
million to a company known as GT Advanced Technologies
Inc. last year, to bankroll sapphire production. Unable to
meet its supply agreements, GTAT filed for bankruptcy in
October 2014. Initially sapphire crystal were in headlines
as its backers claimed it was more scratch resistant and
less breakable than Gorilla Glass. Corning responded that
sapphire is also much more expensive to manufacture and
that it is less transparent and heavier than Gorilla Glass.
Which product is more likely to scratch or break in real
world is still a matter of dispute, but Gorilla Glass
dominance is global smartphone market is set to continue.
4Q14 & FY14 Earnings and 2015 Guidance
For 4Q14, Corning posted ‘core’ revenue of $2.60 billion,
which was up 32% year-over-year on a core basis and
GAAP revenue of $2.40 billion was up 23%. Core EPS of
$0.45 per diluted share for 4Q14 increased 56% year-over-
year. The Wall Street consensus had modeled revenue of
$2.49 billion and core EPS of $0.38 per diluted share for
4Q14.
‘Core’ gross margin narrowed sequentially to 44.7% in
4Q14 for 45.4% in 3Q14, while rising from 40.0% in 4Q13.
Core pretax margin expanded to 29.3% in 4Q14 from
25.7% in 4Q13. Margin comparisons are potentially
distorted by the consolidation of SCP into wholly owned
operations.
On a GAAP basis, Corning reported earnings of $0.70 per
diluted share in 4Q14, compared to $0.70 per diluted
share in 3Q14; a year earlier, GAAP earnings were $0.30
per diluted share. Non-GAAP earnings on a core basis were
$0.45 per diluted share in 4Q14, compared to $0.40 per
diluted share in 3Q14 and $0.29 in 4Q13.
For all of 2014, Corning’s Core revenue of $10.22 declined
increased 26% for $7.95 billion in 2012. Non-GAAP core
earnings totaled $1.53 per diluted share in 2014, up from
$1.24 per diluted share in 2013.
Corning does not provide explicit revenue or EPS guidance
on a quarterly or annual basis. For 1Q15, Optical
Communications revenue is forecast to be up more than
10% annually in 1Q15. Environmental is guided flat,
though up 5% without currency impact. Specialty
Materials revenue is forecast up 10% annually. Within the
framework of its revised core currency exchange rate of 99
yen, the company furnished 1Q15 line-item guidance. Core
gross margin is forecast at about 43%; core SG&A is
forecast at about 13% of revenue, core R&D at about 8%;
and the tax rate is about 18%.
Project Phire
On February 6th
2015, Corning unveiled ‘Project Phire’, a
glass composite that company claims to be just as strong
and drop-resistant as its latest Gorilla Glass but nearly as
scratch-resistant as sapphire. Corning decision to blend
Gorilla Glass and synthetic sapphire is likely to reduce the
threat of its customers switching to sapphire glass
manufacturers. Also, a more sapphire-like version of

Gorilla Glass could help Corning play in some markets
where sapphire is used today such as camera lenses in
some phones including iPhones, Apple’s TouchID buttons
and high-end watches and smartwatches all of which use
sapphire crystal.
Corning acquired Samsung Electronics’ Fiber
Optics Business & TR Manufacturing
This acquisition should provide support to Corning’s
Optical Communications segment growth efforts in Asia.
Samsung is a trusted provider of optical fiber and cable for
customers in South Korea, China and Southeast Asia.
Corning integrated Samsung’s fiber optic business, with
manufacturing facilities in Gumi, South Korea, as well as in
Hainan, China. Corning also acquired TR Manufacturing, a
move through which Corning will be able to add TR
Manufacturing’s fiber and copper cable/component
interconnects and electro-mechanical assemblies, which it
sells to OEMs that target various industry segments such
as military/defense, security equipment, medical imaging
and electronics manufacturing. This also provides Corning
access to Hyperscale segment, which is expected to grow
at 15% CAGR from 2014 to 2018.
INDUSTRY TRENDS
Demand for larger screen sizes
Market data has shown that customers have a desire for
larger screen sizes. This fact is further supported by the
recent example of Apple iPhone 6. The Apple IPhone unit
sales increased beyond expectations even though the
average selling price was increased by around 50 dollars.
One reason for the unusual pattern was the increase in
screen size. iPhone 6 screen size was 4.7 inch compared to
compared to IPhone 5 and 5s which had 4 inch screens.
This love for larger screen size is more prominent in the TV
market. According to DispaySearch, the share of LCD TV 50
inches and above is expected to continue its growth in the
future. This provides the display industry, the glass and
panel makers with a big opportunity that could turn into
their main sales driver in the future.
Share of 50’’ and above LCD TV (Millions)
4K Ultra HD TV- Future growth driver
A 4K UHD television set provides 4 times the total display
resolution of today’s full HDTV sets by doubling the
number of pixels shown horizontally and vertically. It is
being seen as the biggest revenue driver for the industry
going forward. Looking at the forecasts for 4K Ultra HD TV,
it is clear that China is the major market for this
technology. In 2013, 0.9 million was the demand for UHD
TV in which China accounted for 0.7 million. In 2015, the
total demand is expected to rise to 23.3 million and China
will make up 57% of this demand, i.e. 13.3 million. The
UHD TV shipment in US is also expected to increase.
Source: GfK, TV Demand Projector, December 2014
If the expectation does turn into reality, this will be a major
driver for glass substrates industry, as volume shipment
will be significantly boosted due to increase in
replacement sales. But there are some concerns over the
0.7
6
13.33.3
10
0
5
10
15
20
25
2013 2014 2015
2015 4k Ultra HD TV Forecast
(Million)
China ROW

high prices and lack of content for this technology.
Although few studios have already started developing
content exclusively for this technology, general
expectation is that it would take atleast 2-3 years. Also
whether consumers will be convinced enough to switch is
yet to be seen. In fact according to a consumer survey
conducted by CEA that measured interest in 4K TVs,
consumers will need to be convinced to upgrade to these
technologies from the HDTVs they already know. Only 26%
of the survey respondents said they were interested in 4K
technology, while 49% were not interested and 25% were
undecided.
Demand for Fiber Optic Solutions
Increasing use of mobile devices, which require efficient
data transfer, is boosting demand for efficient networking
systems. Also, the growth of cloud environment which
boasts of infinite storage and infinite computing leads to
greater demand for efficient networking systems.
Another thing to note is the change in data consumption
pattern. More data is being used for video content, which
creates demand for faster data transfer. Since fibers are
much efficient that existing copper-based networks and
also support unlimited bandwidth, the demand for optical
solutions is particularly strong.
MARKETS AND COMPETITION
Some of the most important success factors for a business
in this market include having contacts in key markets,
access to the latest and most efficient technology and
techniques, establishment of brand names, establishment
of export markets, access to skilled workforce and
undertaking technical R&D and patent protection.
Over the past five years, the profit margins have gone
down for reasons such as weak revenue growth,
overcapacity, pressure on average selling prices and
restructuring charges. Cost of materials is generally high,
but manufacturers with greater scale such as Corning, are
likely to be in a better position to negotiate with suppliers
on price and may also be in a better position to reduce unit
costs.
Competition in this industry is high and the trend is steady.
The competition is based on price, brand recognition,
innovation and international competition. Innovation is
key in this market. Due to changes in customer demand,
short product life cycles and fierce competition in this
industry, firms must regularly upgrade existing products
and successfully develop and introduce new products to
remain or become relevant to customers.
Moving forward, we expect Gorilla Glass to remain the
preferred choice, especially considering the high cost of
production of Sapphire crystals. Barriers to entry in this
industry are high. The most important reasons for this is
lack of access to technology and intellectual property, lack
of large capital and skilled employees and dominance of
existing players with brand name recognition.
Corning is the largest worldwide producer of glass
substrates for active matrix LCD displays. The environment
for LCD glass substrate products is very competitive but
Corning has sustained its competitive advantages by
investing in new products, providing a consistent and
reliable supply, and using its proprietary fusion
manufacturing process. Asahi Glass Co. Ltd. and Nippon
Electric Glass Co. Ltd. are Corning’s principal competitors
in display glass substrates.
Competition within the communications equipment
industry is intense among several significant companies.
Corning is a leading competitor in the segment’s principal
product groups, which include carrier network and
enterprise network. The competitive landscape includes

industry consolidation, price pressure and competition for
the innovation of new products. These competitive
conditions are likely to persist. Corning’s large scale
manufacturing experience, fiber process, technology
leadership and intellectual property yield cost provide it
with edge over several of its competitors. The primary
competing producers of the carrier network segment are
TE Connectivity Ltd., Prysmian Group, OFS (a Furukawa
Company), Fujikura Ltd., Sumitomo Electric and 3M. The
primary competitors in enterprise network are TE
connectivity, Panduit Corporation and other number of
small companies.
For worldwide automotive ceramic substrate products,
Corning has a major market position that has remained
relatively stable over the past year. Corning has also
established a strong presence in the heavy duty and light
duty diesel vehicle market. Its competitive advantage in
automotive ceramic substrate products for catalytic
converters and diesel filter products for exhaust systems is
based upon global presence, customer service,
engineering design services and product innovation.
Corning’s Environmental Technologies products face
principal competition from NGK Insulators, Ltd. and Ibiden
Co. Ltd. In the Environmental Technologies segment, three
customers accounted for 88% of total segment sales in
aggregate.
For Specialty Materials segment brand recognition and
loyalty, through well-known trademarks are important.
Corning Gorilla Glass is a thin-sheet glass that is better able
to survive events that most commonly cause glass
failure. Its advanced composition allows a deeper layer of
chemical strengthening than is possible with most other
chemically strengthened glasses, making it both durable
and damage resistant. For this segment, Schott, Asahi
Glass Co. Ltd., Nippon Electric Glass Co. Ltd. and Heraeus
are the main competitors for Corning. In the Specialty
Materials segment, three customers accounted for 51% of
segment sales in 2014.
For Life Sciences segment, Corning seeks to maintain a
competitive advantage by emphasizing product quality,
product availability, supply chain efficiency, a wide
product line and superior product attributes. Corning’s
principle worldwide competitors include Thermo Fisher
Scientific, Inc. and Perkin Elmer. Corning also faces
increasing competition from large distributors that have
pursued backward integration or introduced private label
products.
Peer Comparisons
Company
Name Ticker
Market
Cap (B)
($)
Enterprise
Value (B)
($)
Price
($)
EV/
EBITDA EPS($)
P/E
NTM P/BK
Corning GLW 31.31 30.88 24.47 8.52 1.55 15.57 1.6
Display & Specialty Materials
Asahi Glass
TYO:
5201 7.47 11.61 6.29 6.93 0.21 24.51 0.8
Nippon
Electric
Glass
TYO:
5214 2.44 2.15 4.90 5.14 0.10 44.94 0.6
TE
Connectivity TEL 29.63 32.99 72.38 10.73 4.24 17.27 3.2
3M MMM 108.22 111.74 169.61 12.53 8.19 20.85 8.0
Furukawa
Electric Co.
TYO:
5801 1.24 3.81 1.76 10.71 0.07 23.52 0.8
Sumitomo
Electric
TYO:
5802 10.26 15.29 12.92 7.2 12.03 10.53 0.9
Ibiden Co.
Ltd.
TYO:
4062 2.55 2.32 16.87 4.53 0.95 17.89 0.8
NGK
Insulators
Ltd.
TYO:
5333 6.33 6.24 19.32 8.97 1.12 17.47 2.0
Life Sciences
Thermo
Fisher
Scientific,
Inc. TMO 52.12 65.33 131.35 15.32 7.34 17.79 2.5
Perkin
Elmer, Inc. PKI 5.33 6.21 47.15 13.37 2.61 18.09 2.6
Average 22.56 25.77 9.54 3.69 21.29 2.22
Source: Bloomberg
In its biggest revenue segment Display & Specialty
Materials, Corning is the largest company in terms of
market cap. It has significantly higher EPS compared to
peers in this segment and trades at 15.57x, which is
significantly lower that its peers. When compared to peers
in Optical Communications segment, Corning appears to
be trading at a bargain price. TE Connectivity, Corning’s
most comparable competitor in this segment has NTM P/E
of 17.27x and P/BK value of 3.2 compared to 1.6 for
Corning.
Corning also seems to be trading at cheaper price than its
peers in Environmental Technologies segment. Also
forward EPS for Corning is higher than Ibiden and NKG
Insulators. Corning’s P/E NTM seems to lower than its
peers even in Life Sciences segment but forward EPS for its
peers, Thermo Scientific and PerkinElmer, is higher.
In Display & Specialty Materials segment, Corning has
significantly higher operating margin, net profit margin
and return on equity. This could be attributed to its size,
its global presence and its product such as Gorilla Glass

which is the preferred glass for device manufacturers and
allows them to maintain healthy margins.
Company
Name Ticker
Dividend
Yield (%)
Operating
Income
Margin
(%)
Net
Profit
Margin
(%)
Net
Debt/Equity
(%)
Capex/
Sales
(%)
ROE
(%)
Corning GLW 2.11 19.88 25.45 -12.95 11.08 12.11
Display & Specialty Materials
Asahi Glass
TYO:
5201 2.3 4.61 1.18 36.39 8.45 1.44
Nippon
Electric Glass
TYO:
5214 2.8 2.07 3.09 -8.34 17.96 1.56
TE
Connectivity TEL 1.54 14.54 13.52 36.59 4.84 21.37
3M MMM 2.0 22.42 15.57 26.53 4.69 32.38
Furukawa
Electric Co.
TYO:
5801 1.4 2.07 0.15 136.56 4.22 0.69
Sumitomo
Electric
TYO:
5802 1.6 4.54 4.12 24.95 5.55 8.90
Ibiden Co.
Ltd.
TYO:
4062 1.5 7.35 5.32 -8.43 11.61 4.91
NGK
Insulators
Ltd.
TYO:
5333 1.1 15.35 12.23 -5.44 9.07 12.00
Life Sciences
Thermo
Fisher
Scientific,
Inc. TMO 0.46 14.82 11.22 64.30 2.53 10.13
Perkin
Elmer, Inc. PKI 0.59 9.37 7.05 42.93 1.3 7.82
Average 1.53 9.71 7.35 34.60 7.02 10.12
Source: Bloomberg
TE Connectivity and 3M generate better ROE but they use
more leverage as well as shown by Net Debt to Equity
ratio. TE Connectivity is set to be Corning biggest
competitor moving forward. Overall , we believe Corning
is very well positioned in each of their major segment,
especially in Display and Specialty materials, to remain one
of the most profitable as they are historically have
continued to find ways to improve their products, sales
and margins despite substantial growth of competition in
the last 10 years in the technology sector.
ECONOMIC OUTLOOK
Gross Domestic Product
Many high-income countries continue to struggle with the
aftermath of global financial crisis. Recovery in the high-
income economies has been uneven, as some countries,
such as the United States and the United Kingdom, have
exceeded pre-crisis output peaks, but others such as
countries in Euro area are still below earlier peaks. Low-
income countries continue to grow at a robust pace,
despite a challenging global environment.
Source: World Bank, GEP Forecast January 2015
According to World Bank, global growth is expected to rise
in 2015 to 3% and is expected to be at 3.2%-3.3% in 2016-
17. U.S. GDP growth was 5% in the third quarter of 2014.
We expect the economy to stabilize and predict growth to
settle at 3.4% in next six months. Healthy GDP growth is
positively correlated with spending in consumer
electronics industry and should promote growth in the
industry.
Source: World Bank, GEP Forecast January 2015
73% of revenues in 2014 for Corning came from operations
in Asia Pacific region. Healthy growth in GDP is expected in
the region from 2015 to 2017, which should be increase
technology spending across industry as they look to
upgrade their IT infrastructure to tap the future growth.
Growth in phones, tablets, high end flat panel devices will
drive Corning’s earnings in Display Technologies segment.
Also, increased sales of automobiles will lead to sales of
Corning’s filter products in Environmental Technologies
Segment. Optical Communications will continue to benefit
from increase in spending in connected devices. Users of
these devices will have increasing demand for faster and
wider bandwidth that optimizes the connectivity of their
devices. As this demand increases, sales of carrier and
network inputs, such as optical fiber will grow, especially
in emerging markets.

Exchange Rate
Majority of companies in this industry either have foreign
operations and/or depend on the foreign market. This
makes these companies susceptible to exchange rate
volatility. Sales in Display Technologies segment,
representing 40% of Corning’s sales in 2014, are
denominated in Japanese yen. Corning hedges significant
translation, transaction and balance sheet currency
exposures and uses a variety of derivative instruments to
reduce the impact of foreign currency fluctuations
associated with certain monetary assets and liabilities as
well as operating results including their net profits. In 2014
Japanese Yen weakened against US dollar and the negative
impact of the Japanese yen versus the U.S. dollar exchange
rate in 2014 was $373 million. This was offset by the
positive net impact of Corning’s yen-denominated hedge
programs, driven by the weakening of the Japanese yen in
2014, in the amount of $560 million. Current exchange
rate is $1= 119.0 Japanese Yen. We expect the rate to be
$1=115.75, six months down the line and $1= 113.58 two
years from now. Corning current hedge rate is $1=99
Japanese Yen. Thus, we expect that as long as Corning
maintains its hedging policy, it should have positive net
impact from Yen-denominated hedge programs. Corning is
100% hedged against yen movements in 2015, 80%
hedged for 2016, and 70% hedged for 2017.
CATALYSTS FOR GROWTH
Automobile Glass
Demand of glass in on the up in automobile industry.
Automotive electronics is expected to have continued
growth. The TFT-LCD shipments for the instrument cluster
in automobiles are expected to grow 48% to reach 30.2
million units this year, growing further to reach 50 million
units in 2018. In-Car safety innovations will drive expanded
use of dashboard screens. Automakers around the world
are working to reduce the weight of their vehicles to meet
strict mobile emissions regulations. Corning Gorilla Glass
for Automotive is now available to help automakers meet
this objective by enabling a weight reduction in glazing of
more than 50% versus conventional soda lime glass.
Corning Gorilla Glass for Automotive can be used in all
openings of a vehicle, including windshields, sidelights,
sunroofs, and backlights. It can also be used in automotive
interior touch panels. If Corning can secure a contract from
certain car manufacturer for Gorilla Glass, that will serve
as a long-term driver for the Specialty Material segment.
Innovation
For more than 160 years, Corning has applied its expertise
in specialty glass, ceramics, and optical physics to develop
products that have created new opportunities. Although
Corning’s overall spending level for research, development
and engineering decreased slightly from 9% of sales in
2013 to 8% of sales in 2014, it maintained its innovation
strategy focused on growing its existing businesses,
developing opportunities adjacent or closely related to its
existing technical and manufacturing capabilities, and
investing in long-range opportunities in each of its market
segments.
All of its segments continue to work on new products,
including glass substrates for high performance displays
and LCD applications, precision glass for advanced
displays, emissions control products for cars, trucks, and
off-road vehicles, products that accelerate drug discovery
and manufacturing and the optical fiber, cable and
hardware and equipment that enable fiber-to-the-
premises, and next generation data centers. In addition, it
is focusing on wireless solutions for diverse venue
applications, such as distributed antenna systems, fiber-
to-the cell site and fiber-to-the antenna. Corning has
focused its research, development and engineering
spending to support the advancement of new product
attributes for its Corning Gorilla Glass suite of products.
We expect Corning to continue to focus on adjacent glass
opportunities which leverage existing materials or
manufacturing processes, including Corning® Willow™
Glass, its ultra-slim flexible glass substrate for use in next-
generation consumer electronic technologies.
INVESTMENT POSITIVES
• Increase in TV sizes drove glass market in 2014, with
screen sizes of 50-inch and more growing as much as 50%.
We expect the trend to continue. We expect price declines
to remain moderate going forward. The ultra high-
definition televisions which have higher average screen
size, higher resolution and more pixels will become a
major growth driver of the glass market. This will improve
Corning’s dollar content from Display Technologies
segment.

• Increasing use of connected devices, emergence of cloud
environment and change in pattern of data consumption
(around 50% data used for video content) will promote
demand for efficient network. Global data is estimated at
4.4 trillion Gigabytes and is expected to double every year.
Number of connected devices is expected to reach 19
billion mark by 2018. Wireless Distributed Antenna
Systems are expected to grow at 14% CAGR from 2014 to
2018. Data centers are expected to grow at 10% CAGR
from 2014 to 2018. Fiber–to–the-home (FTTH) network is
growing at 9%. We expect these factors to drive Corning’s
growth in next few years.
• Growth possibilities in automotive market. There has
been increasing trend of use of Gorilla Glass in automobile
industry, which is believed to be 7 billion market. Corning
Gorilla Glass for automotive can be used in all openings of
a vehicle, including windshields, sidelights, sunroofs, and
backlights. It can also be used in automotive interior touch
panels. If Corning can secure a contract from certain car
manufacturer for Gorilla Glass, that will serve as a long-
term driver for the Specialty Material segment.
• Emissions standards are becoming stricter in many areas
of the world due to environmental concerns like global
warning and pollution. Corning has a broad portfolio of
products which reduce the output of emissions in vehicles
and thus will benefit from both increase in number of
vehicles and stricter restrictions.
INVESTMENT NEGATIVES
• Continued pricing pressure in LCD industry. Due to
consumers’ trend of shifting to lower end devices in
emerging markets, there is constant pricing pressure on
devices manufactures, who then transfer this pressure on
panel makers and glass manufacturers in order to save
margins. This decline in average selling prices offsets the
growth in volume shipments and restricts the revenue
upside for Display Technologies segment.
• Treat of breakthrough innovations. Although Gorilla
Glass is currently market’s preferred choice, any
breakthrough innovations such as sapphire can
compromise its competitive advantage and result in loss of
contracts and market share for Display and Specialty
Materials segments.
• Weaker demand for ultra high-definition television.
Weaker than expected demand for ultra high-definition TV
could result in loss of capacity and resources and lead to
decline in prices due to excess supply.
VALUATION
Our investment thesis is the outcome if careful analysis of
Corning, Inc. as a company, its segments’ industries,
macro-economic outlook, and preparation of detailed
financial modeling. In this part of the report we will discuss
the key assumptions behind our financial model and
investment thesis.
After a strong result in 2014 for Display Technologies
segment, mainly due to the inorganic growth of
consolidating Corning Precision Materials, we expect
revenue for this segment to decline by 2% in 2015. We
expect Corning’s LCD market share in terms of % of
revenue to remain steady and increase gradually from
4.65% in 2015 to 4.71% in 2020. We expect the total
number of LCD shipments to increase at 1.61% CAGR from
2015 to 2020 and average LCD price per shipment to
revenue for this segment to increase at 3% CAGR from
2015 to 2020.
Optical Communication is the segment we are most
positive about. We expect revenues from this segment to
grow by 10% in 2015. We expect this segment to grow at
4% CAGR from 2015-2020. Global demand for network is
on the rise and it will drive demand for Corning’s optical
fiber solutions. Growing number of heavy duty and light
duty vehicles and tighter emission regulations will drive
growth for Environmental Technologies segment. We
expect the revenues in 2015 to increase by 1%, after major
part of it will be offset by decline in Euro. Without foreign
currency effects the growth would have been 6%. We
expect this segment to grow at 3% CAGR from 2015-2020.
Corning released Gorilla Glass 4 in November 2014 and
due to its recent release the price should not decline in
2015. Gorilla Glass remains the preferred choice in the
market. Thus, we expect 10% growth in the revenue of
Specialty Materials segment in 2015. Over the period of
2015-2020, we expect this segment to grow at 4.5% CAGR.
We expect the revenue from Life Sciences to grow by 2%
in 2015. We expect this segment to grow at 1.7% CAGR
from 2015-2020. Also Corning’s earnings from Dow
Corning is expected to go up by 10% due to increase in
demand of Polysillicone. We expect the total revenue to
increase at 3.04% CAGR from 2015 to 2020. Considering

both sides, Corning being a market leader for majority of
its segments especially Display Technologies and the
cyclical nature of the industry, we believe that long term
growth rate 3.5% would be appropriate.
We expect cost of goods sold (COGS) in 2015 to decrease
by 1.28% with respect to revenue, as display segment will
benefit from synergies from complete consolidation of
Corning Precision Materials. We expect COGS to increase
at 1.93% CAGR from 2015 to 2020. Historically R&D for
Corning has decreased year-over-year as % of sales. We
expect the R&D for 2015 would be consistent with,
management guidance of 8% of sales. We expect R&D to
SG&A to remain steady to decline slightly year-over-year
with respect to revenue, as compared to historical
average. We expect SG&A to increase at 1.36% CAGR from
2015 to 2020. We expect net income to increase at 3.49%
CAGR from 2015 to 2020. We expect earnings per share to
increase at 4.97% CAGR from 2015 to 2020.
Management has described the current level of Capital
Expenditures to be at a maintaining level as a result of
increased expenditures in previous periods. The
management guidance for 2015 was 1.3-1.4 billion. We
expect strong growth in multiple segments which will
require increased capacity and large capital expenditures.
Going forward and anticipating the coming wave of UHD
TV, Corning will need to increase capital expenditures.
We compared 1 year, 2 year, 3 year, 4 year and 5 year
weekly data from Bloomberg. The 3 year raw Beta of 1.45
seemed to be a reasonable estimate. Risk premium of
4.85% was used, which is an average of 87 years geometric
average of stock return in excess of the 30-year Treasury
bond yield, and Damodaran’s equity premium calculated
monthly as at March, 1 2015. Return on 30 year US
treasury rate of 2.71% was used as proxy for risk free rate.
We used Discounted Cash Flow (DCF), Economic Profit
(EP), and Dividend Discount Model (DDM) to come up with
our price of $24.36 for DCF and $20.97 for DDM. From our
calculations we recommend HOLD rating for Corning Inc.
(GLW) with a mean target price of $25, which provides
8.23% upside from its current market price of $23.10.
KEYS TO MONITOR
We will provide Corning a SELL rating if it is not able to
maintain its market share for LCD TV. Also if the volume
shipment do not increase as projected we would consider
selling, as the decline in average selling price is expected
to be a continual trend in this industry.
On the other hand, if car manufacturers start using
specialty materials such as Corning Gorilla Glass in their
new models, this would open up a new market for Corning
believed to be worth $7 billion. In this instance we would
recommend a BUY for this stock.
REFERENCES
1) Corning, Inc. 10-K 2014, 2013, 2012, 2010, 2008, 2006
2) Stricter Emission Standards and Growing Automobile Sales to
Drive Corning's Environmental Technologies Business
http://www.forbes.com/sites/greatspeculations/2014/02/19/st
ricter-emission-standards-and-growing-automobile-sales-to-
drive-cornings-environmental-technologies-business/
3) Capacity Expansion Will Likely Help Corning Cater to Growing
Demand for Emission Filters
http://www.forbes.com/sites/greatspeculations/2014/11/20/c
apacity-expansion-will-likely-help-corning-cater-to-growing-
demand-for-emission-filters/
4) Corning Watch: Sapphire threat to Gorilla Glass dims
http://www.stargazette.com/story/news/local/2014/12/31/cor
ing-gorilla-glass-sapphire-apple-iphone/21115817/
5) Next –Generation TVs and Displays by Robert E. Calem
6) Corning® Gorilla® Glass for Automotive Receives BMW
Supplier Innovation Award
http://www.corning.com/news_center/news_releases/2014/2
014100701.aspx
7) Flat Panel Display Area Demand Growing Rapidly, According
to HIS
http://www.displaysearch.com/cps/rde/xchg/displaysearch/hs.
xsl/150129_flat_panel_display_area_demand_growing_rapidly.
asp
8) LCD TV Shipment Forecast Revised Upward on Strong
Consumer Demand for Larger Sizes, DisplaySearch Reports
xsl/141231_lcd_tv_shipment_forecast_revised_upward_on_str
ong_consumer_demand_for_larger_sizes.asp

9) In-Car Safety Innovations Drive Expanded Use of Dashboard
Screens, DisplaySearch Reports
xsl/141124_in_car_safety_innovations_drive_expanded_use_o
f_dashboard_screens.asp
10) S&P Capital IQ report
11) Factset Research Systems
12) Bloomberg
13) Factiva
14) UHD Resolution Displays Lead Growth in Global Broadcast
and Production Display Category, According to NPD
DisplaySearch
xsl/140610_uhd_resolution_displays_lead_growth_in_global_b
roadcast_and_production_display_category.asp
15) 4Kx2K TVs: Will They Stimulate or Slow the Market? – Paul
Gray
16) Strong LCD, 4K UHD sales drive bump in global TV shipments
- Jim O’Neill
IMPORTANT DISCLAIMER
Henry Fund reports are created by student enrolled in the
Applied Securities Management (Henry Fund) program at
the University of Iowa’s Tippie School of Management.
These reports are intended to provide potential employers
and other interested parties an example of the analytical
skills, investment knowledge, and communication abilities
of Henry Fund students. Henry Fund analysts are not
registered investment advisors, brokers or officially
licensed financial professionals. The investment opinion
contained in this report does not represent an offer or
solicitation to buy or sell any of the aforementioned
securities. Unless otherwise noted, facts and figures
included in this report are from publicly available sources.
This report is not a complete compilation of data, and its
accuracy is not guaranteed. From time to time, the
University of Iowa, its faculty, staff, students, or the Henry
Fund may hold a financial interest in the companies
mentioned in this report.

Revenue Breakdown – Display Technologies Segment
Year 2015E 2016E 2017E 2018E 2019E 2020E
Corning LCD market share % of revenue 4.65% 4.66% 4.67% 4.68% 4.70% 4.71%
Total number of LCD shipments (Millions) 2500 2551 2592 2640 2684 2708
Average LCD price per shipment 32.47$ 33.02$ 33.40$ 33.70$ 34.00$ 34.30$
Total 3774 3925 4043 4164 4289 4375
Corning Incorporated
Revenue Decomposition
Fiscal Years Ending Dec. 31 2012 2013 2014 2015E 2016E 2017E 2018E 2019E 2020E 2021E
Display Technologies 2909 2545 3851 3774 3925 4043 4164 4289 4375 4462
YoY Growth -7.5% -12.5% 51.3% -2.0% 4.0% 3.0% 3.0% 3.0% 2.0% 2.0%
Telecommunications / Optical Communications* 2130 2326 2652 2917 3063 3186 3281 3347 3380 3414
YoY Growth 2.8% 9.2% 14.0% 10.0% 5.0% 4.0% 3.0% 2.0% 1.0% 1.0%
Optical fiber and cable / Carrier Network* 1619 1782 2036 2280 2417 2538 2627 2679 2706 2733
YoY Growth 4.0% 10.1% 15.0% 12.0% 6.0% 5.0% 3.5% 2.0% 1.0% 1.0%
Hardware and Equipment / Enterprise Network* 511 544 616 637 646 648 654 667 674 681
YoY Growth -1.0% 6.5% 13.2% 3.4% 1.4% 0.3% 1.0% 2.0% 1.0% 1.0%
Environmental Technologies 964 919 1092 1103 1125 1170 1205 1241 1266 1291
YoY Growth -3.4% -4.7% 18.8% 1.0% 2.0% 4.0% 3.0% 3.0% 2.0% 2.0%
Automotive 486 485 528 549 577 611 636 661 681 701
YoY Growth 2.1% -0.2% 22.0% 4.0% 5.0% 6.0% 4.0% 4.0% 3.0% 3.0%
Diesel 478 434 564 554 548 559 569 580 585 590
YoY Growth -8.4% -9.2% 30.0% -1.8% -1.0% 1.9% 1.9% 1.9% 0.9% 0.8%
Specialty Materials 1346 1170 1205 1326 1418 1475 1534 1595 1643 1693
YoY Growth 25.3% -13.1% 3.0% 10.0% 7.0% 4.0% 4.0% 4.0% 3.0% 3.0%
Life Sciences 657 851 862 879 897 915 933 952 961 971
YoY Growth 10.4% 29.5% 1.3% 2.0% 2.0% 2.0% 2.0% 2.0% 1.0% 1.0%
All Other 6 8 53 37 33 32 33 32 33 33
YoY Growth 0.0% 33.3% 562.5% -30.0% -10.0% -5.0% 3.0% -2.0% 2.0% 2.0%
Total Revenues 8012 7819 9715 10036 10461 10820 11150 11456 11658 11864
Y/Y Revenue Growth 1.5% -2.4% 24.2% 3.3% 4.2% 3.4% 3.1% 2.7% 1.8% 1.8%
*In 2013, Corning Inc. changed the name of this segment
from 'Telecommunications' to 'Optical Commuications' .
They also changed the names & method of reporting for the
sub-segments & restated 2011 & 2012 revenues.

Income Statement
Net sales 8012 7819 9715 10036 10461 10820 11150 11456 11658 11864
Total cost of sales 4693 4495 5663 5720 5963 6059 6244 6301 6295 6407
Depreciation Expense 978 971 1167 1120 1149 1178 1204 1227 1249 1271
Cost of sales excluding depreciation 3715 3524 4496 4600 4814 4881 5040 5074 5047 5136
Gross margin 3319 3324 4052 4315 4498 4761 4906 5155 5363 5458
Operating Expenses
Selling, general & administrative expenses 1205 1126 1211 1204 1255 1298 1338 1375 1282 1305
Research, development & engineering expenses 769 710 815 803 837 866 892 916 933 949
Amortization of purchased intangibles 19 31 33 33 32 32 32 32 32 32
Restructuring, impairment & other charges (credits) 133 67 71 46 167 32 134 160 64 65
Asbestos litigation charge (credit) 14 19 (9) 9 9 10 11 12 13 13
Operating income (loss) 1179 1371 1931 2220 2198 2522 2499 2660 3039 3093
Equity in earnings of affliliated companies 810 547 266 201 209 216 223 229 233 237
Interest income 14 8 26 25 27 30 33 36 40 44
Interest expense (111) (120) (123) (136) (143) (139) (151) (143) (155) (149)
Other income (expense), net 83 667 1468 1359 1260 1181 1125 1077 590 545
Income (loss) before income taxes 1975 2473 3568 3669 3551 3810 3729 3859 3747 3770
Provision (Benefit) for income taxes 339 512 1096 1004 942 866 669 745 583 593
Net income (loss) 1636 1961 2472 2665 2609 2945 3060 3114 3164 3177
Year end shares outstanding 1494 1452 1358 1308 1282 1259 1245 1239 1219 1200
Net income (loss) per share - basic 1.10 1.35 1.82 2.04 2.04 2.34 2.46 2.51 2.60 2.65
Total dividends declared 500 583 755 830 799 900 928 939 965 968
Dividends declared per common share 0.32 0.39 0.52 0.61 0.61 0.70 0.74 0.75 0.78 0.79
Dividends payout ratio 0.29 0.29 0.29 0.30 0.30 0.30 0.30 0.30 0.30 0.30

Balance Sheet
Current Assets
Cash & cash equivalents 4988 4704 5309 5837 5964 6972 7937 8938 9071 9637
Short-term investments, at fair value 1156 531 759 835 918 1010 1111 1222 1345 1479
Total cash, cash equivalents & short-term investments 6144 5235 6068 6672 6882 7982 9048 10160 10416 11116
Trade accounts receivable, net 1302 1253 1501 1528 1674 1569 1516 1867 1795 1827
Total Inventories 1051 1270 1322 1334 1465 1655 1494 1466 1574 1602
Deferred income taxes 579 278 248 248 248 248 248 248 248 248
Other current assets 619 855 1099 1064 1078 1093 1126 1157 1201 1222
Total current assets 9695 8891 10238 10846 11346 12547 13433 14899 15234 16015
Investments 4915 5537 1801 1981 2179 2397 2637 2901 3191 3510
Property, net of accumulated depreciation 10625 9801 12766 12445 12763 13092 13380 13634 13874 14120
Goodwill 974 1002 1150 1150 1150 1150 1150 1150 1150 1150
Other intangible assets 522 540 497 502 513 487 479 475 472 469
Deferred income taxes 2343 2234 1889 1889 1889 1889 1889 1889 1889 1889
Other assets 301 473 1722 853 785 649 468 390 525 534
Total assets 29375 28478 30063 29665 30624 32211 33436 35337 36334 37686
Current Liabilities
Current portion of long-term debt 76 21 36 36 71 257 3 253 0 0
Accounts payable 779 771 997 1024 1057 1060 1082 1180 1177 1198
Other accrued liabilities 359 370 1291 643 659 685 728 761 783 794
Total current liabilities 1956 1746 2324 1703 1787 2002 1812 2194 1961 1992
Long-term debt 3382 3272 3227 3405 3263 3369 3438 3461 3573 3678
Postretirement benefits other than pensions 930 766 814 783 778 766 763 770 692 679
Other non-current liabilities 903 793 2046 1082 1088 1114 1126 1134 1131 1151
Total liabilities 7842 7267 8411 6973 6916 7252 7139 7559 7357 7499
Shareholder's Equity
Convertible preferred stock - - 2300 2300 2300 2300 2300 2300 2300 2300
Common stock and Additional paid in capital 13971 13897 14292 14498 14703 14909 15114 15421 15421 15421
Retained earnings (accumulated deficit) 10588 11320 13021 14856 16666 18712 20843 23019 25218 27427
Treasury stock, at cost (2773) (4099) (6727) (7727) (8727) (9727) (10727) (11727) (12727) (13727)
Accumulated other comprehensive income (loss) (300) 44 (1307) (1307) (1307) (1307) (1307) (1307) (1307) (1307)
Total Corning Incorporated shareholders' equity 21486 21162 21579 22619 23636 24887 26224 27706 28904 30114
Minority / Noncontrolling interests 47 49 73 73 73 73 73 73 73 73
Total equity 21533 21211 21652 22692 23709 24960 26297 27779 28977 30187
Total liabilities and Equity 29375 28478 30063 29665 30624 32211 33436 35337 36334 37686

Cash Flow Statement
Fiscal Years Ending Dec. 31 2012 2013 2014
Cash Flows from Operating Activities
Net income (loss) 1728 1961 2472
Depreciation 978 971 1167
Amortization of purchased intangibles 19 31 33
Asbestos litigation (credits) charges - - -
Restructuring, impairment & other charges (credits) 133 67 71
Loss (gain) on repurchases & retirement of debt 26 - -
Stock compensation charges 70 54 58
Loss (gain) on sale of business - -
Undistributed earnings of affiliated companies less than (in excess of) dividends received280 83 1438
Deferred tax provision (benefit) 68 189 612
Interest expense on convertible debentures - - -
Restructuring payments (15) (35) (39)
Cash received from settlement of insurance claims - - -
Restricted cash - - -
Income tax refund - - -
Credits issued against customer deposits - - -
Employee benefit payments less than (in excess of) expense 36 52 (52)
Unrealized gains on translated earnings contracts - (367) (938)
Contingent consideration fair value adjustment (249)
Trade accounts receivable (272) (29) (16)
Inventories (23) (247) 2
Other current assets (81) 34 (16)
Accounts payable & other current liabilities 189 (23) (3)
Other adjustments, net 70 46 169
Net cash flows from operating activities 3206 2787 4709
Cash Flows from Investing Activities
Capital expenditures (1801) (1019) (1076)
Acquisitions of businesses, net of cash received (723) (68) 66
Net proceeds from sale of businesses - - -
Net proceeds (payments) from sale or disposal of assets - - -
Investment in affiliates (111) - -
Investment in unconsolidated entities - (526) (109)
Net increase (decrease) in long-term investments & other long-term assets - - -
Short-term investments - acquisitions (2270) (1406) (1398)
Short-term investments - liquidations 2269 2026 1167
Premium on purchased collars - (107) -
Realized gains on translated earnings contracts - 87 361
Restricted investments - liquidations - - -
Other investing activities, net 8 9 27
Net cash flows from investing activities (2628) (1004) (962)
Cash Flows from Financing Activities
Net repayments of short-term borrowings & current portion of long-term debt (26) (71) (52)
Proceeds from unwind of interest rate swap agreements - -
Proceeds from issuance of long-term debt, net 1362 248 -
Proceeds from issuance of short-term debt, net 29
Proceeds (payments) from the settlement of interest rate swap agreements (18) 33 -
Proceeds received for asset financing & related incentives, net - 276 1
Retirements of long-term debt, net (280) (498) -
Principal payments under capital lease obligations (1) (7) (6)
Payments to acquire noncontrolling interest - (47) -
Proceeds from issuance of preferred stock, net - - 400
Proceeds from issuance of common stock, net - - -
Proceeds from the exercise of stock options 38 85 116
Repurchases of common stock for treasury (720) (1516) (2483)
Dividends paid (472) (566) (591)
Cash dividends paid to preferred & common shareholders - - -
Other financing activities, net 2 - -
Net cash flows from financing activities (115) (2063) (2586)
Effect of exchange rates on cash (136) (4) (556)
Net increase (decrease) in cash & cash equivalents 327 (284) 605
Cash & cash equivalents at beginning of year 4661 4988 4704
Cash & cash equivalents at end of year 4988 4704 5309

Cash Flow Statement Forecast
Fiscal Years Ending Dec. 31 2015E 2016E 2017E 2018E 2019E 2020E 2021E
Cash Flows from Operating Activities
Net Income (loss) 2665 2609 2945 3060 3114 3164 3177
Depreciation & Amortization 1153 1181 1210 1236 1259 1281 1303
Changes in Working Capital Accounts:
Change in Accounts Receivables (27) (146) 105 52 (351) 72 (32)
Change in Inventories (12) (131) (191) 161 28 (107) (28)
Change in Other Current Assets 35 (14) (15) (33) (31) (44) (21)
Change in Deferred Taxes 0 0 0 0 0 0 0
Change in Accounts Payable 27 33 4 21 98 (3) 21
Change in Accrued Compensation and Other Liabilities (648) 16 26 43 33 22 10
Change in Income Taxes Payable 0 0 0 0 0 0 0
Change in Other Non-Current Liabilities (964) 5 26 12 8 (3) 20
Net cash flows from operating activities 2230 3554 4110 4552 4159 4382 4450
Cash Flows from Investing Activities
(Increase) Decrease in short-term investments (76) (83) (92) (101) (111) (122) (134)
(Increase) Decrease in long-term investments (180) (198) (218) (240) (264) (290) (319)
Capital Expenditures (Change in gross PPE) (832) (1499) (1539) (1524) (1513) (1521) (1548)
Change in intangible assets (5) (11) 26 7 4 3 4
Change in goodwill 0 0 0 0 0 0 0
(Increase) Decrease in other assets 869 68 135 181 79 (135) (9)
Net cash flows from investing activities (223) (1723) (1688) (1677) (1805) (2065) (2007)
Cash Flows from Financing Activities
Proceeds from issuance of ST debt 0 35 186 (254) 250 (253) 0
Proceeds from issuance of long-term debt 178 (142) 106 69 23 112 105
Payment of Dividends (830) (799) (900) (928) (939) (965) (968)
Proceeds from issuance of convertible preferred stock 0 0 0 0 0 0 0
Proceeds from issuance of common stock 206 206 206 206 306 0 0
Post-Retirement Liability other than pensions (31) (4) (12) (3) 7 (77) (14)
Payments of Asbestos Litigation Liability 0 0 0 0 0 0 0
Repurchases of common stock (1000) (1000) (1000) (1000) (1000) (1000) (1000)
Changes in accumulated other comprehensive income 0 0 0 0 0 0 0
Net cash flows from financing activities (1478) (1705) (1414) (1911) (1353) (2183) (1877)
Change in Cash 528 126 1008 965 1001 133 566
Cash and cash equivalent, beginning of the period 5309 5837 5964 6972 7937 8938 9071
Cash and cash equivalent, ending of the period 5837 5964 6972 7937 8938 9071 9637

Common Size Income Statement
Net sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Cost of sales 58.57% 57.49% 58.29% 57.00% 57.00% 56.00% 56.00% 55.00% 54.00% 54.00%
Depreciation Expense (% of Net PPE) 9.20% 9.91% 9.14% 9.00% 9.00% 9.00% 9.00% 9.00% 9.00% 9.00%
Cost of sales excluding depreciation 46.37% 45.07% 46.28% 45.84% 46.02% 45.11% 45.20% 44.29% 43.29% 43.29%
Gross margin 41.43% 42.51% 41.71% 43.00% 43.00% 44.00% 44.00% 45.00% 46.00% 46.00%
Operating Expenses
Selling, general & administrative expenses 15.04% 14.40% 12.47% 12.00% 12.00% 12.00% 12.00% 12.00% 11.00% 11.00%
Research, development & engineering expenses 9.60% 9.08% 8.39% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00%
Amortization of purchased intangibles 0.24% 0.40% 0.34% 0.33% 0.31% 0.30% 0.29% 0.28% 0.27% 0.27%
Restructuring, impairment & other charges (credits) 1.66% 0.86% 0.73% 0.46% 1.60% 0.30% 1.20% 1.40% 0.55% 0.55%
Asbestos litigation charge (credit) 0.17% 0.24% -0.09% -0.09% -0.09% -0.09% -0.09% -0.09% -0.09% -0.09%
Operating income (loss) 14.72% 17.53% 19.88% 22.12% 21.01% 23.31% 22.41% 23.22% 26.06% 26.07%
Equity in earnings of affliliated companies 10.11% 7.00% 2.74% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%
Interest income 0.23% 0.13% 1.02% 0.97% 0.97% 0.97% 0.97% 0.97% 0.97% 0.97%
Interest expense -3.21% -3.64% -3.77%
Other income (expense), net 1.04% 8.53% 15.11% 13.54% 12.05% 10.91% 10.09% 9.41% 5.06% 4.60%
Income (loss) before income taxes 24.65% 31.63% 36.73% 36.55% 33.94% 35.22% 33.44% 33.68% 32.14% 31.78%
Provision (Benefit) for income taxes 4.23% 6.55% 11.28% 10.00% 9.00% 8.00% 6.00% 6.50% 5.00% 5.00%
Net income (loss) 20.42% 25.08% 25.45% 26.55% 24.94% 27.22% 27.44% 27.18% 27.14% 26.78%

Common Size Balance Sheet (% of Sales)
Current Assets
Cash & cash equivalents 62.26% 60.16% 54.65% 58.17% 57.01% 64.44% 71.18% 78.02% 77.81% 81.23%
Short-term investments, at fair value 4.15% 1.81% 2.67%
Total cash, cash equivalents & short-term investments 76.68% 66.95% 62.46% 58.17% 57.01% 64.44% 71.18% 78.02% 77.81% 81.23%
Trade accounts receivable, net 16.25% 16.03% 15.45% 15.22% 16.00% 14.50% 13.60% 16.30% 15.40% 15.40%
Total Inventories 13.12% 16.24% 13.61% 13.29% 14.00% 15.30% 13.40% 12.80% 13.50% 13.50%
Deferred income taxes 7.23% 3.56% 2.55% 2.47% 2.37% 2.29% 2.22% 2.16% 2.13% 2.09%
Other current assets 7.73% 10.93% 11.31% 10.60% 10.30% 10.10% 10.10% 10.10% 10.30% 10.30%
Total current assets 121.01% 113.71% 105.38% 99.75% 99.68% 106.63% 110.51% 119.38% 119.14% 122.52%
Investments 17.65% 18.85% 6.32%
Property, net of accumulated depriciation 132.61% 125.35% 131.41% 124.00% 122.00% 121.00% 120.00% 119.01% 119.01% 119.01%
Goodwill 12.16% 12.81% 11.84% 11.46% 10.99% 10.63% 10.31% 10.04% 9.86% 9.69%
Other intangible assets 6.52% 6.91% 5.12% 5.00% 4.90% 4.50% 4.30% 4.15% 4.05% 3.95%
Deferred income taxes 29.24% 28.57% 19.44% 18.82% 18.06% 17.46% 16.94% 16.49% 16.20% 15.92%
Other assets 3.76% 6.05% 17.73% 8.50% 7.50% 6.00% 4.20% 3.40% 4.50% 4.50%
Total assets 366.64% 364.22% 309.45% 267.53% 263.13% 266.22% 266.26% 272.47% 272.76% 275.59%
Current Liabilities
Current portion of long-term debt 3.21% 0.62% 1.10%
Accounts payable 9.72% 9.86% 10.26% 10.20% 10.10% 9.80% 9.70% 10.30% 10.10% 10.10%
Other accrued liabilities 4.48% 4.73% 13.29% 6.41% 6.30% 6.33% 6.53% 6.64% 6.72% 6.69%
Total current liabilities 24.41% 22.33% 23.92% 16.61% 16.40% 16.13% 16.23% 16.94% 16.82% 16.79%
Long-term debt 15.36% 14.08% 13.88% 14.19% 14.19% 14.19% 14.19% 14.19% 14.19% 14.19%
Postretirement benefits other than pensions 77.18% 68.03% 67.22% 65.00% 62.00% 59.00% 57.00% 56.00% 54.00% 52.00%
Other non-current liabilities 11.27% 10.14% 21.06% 10.79% 10.40% 10.30% 10.10% 9.90% 9.70% 9.70%
Total liabilities 97.88% 92.94% 86.58% 106.58% 102.99% 99.62% 97.52% 97.03% 94.71% 92.68%
Shareholder's Equity
Convertible preferred stock - - 23.67% 22.92% 21.99% 21.26% 20.63% 20.08% 19.73% 19.39%
Common stock & Additional paid-in capital 174.38% 177.73% 147.11% 144.46% 140.55% 137.79% 135.56% 134.61% 132.28% 129.98%
Retained earnings (accumulated deficit) 132.15% 144.78% 134.03% 148.03% 159.31% 172.94% 186.94% 200.93% 216.31% 231.17%
Treasury stock, at cost -34.61% -52.42% -69.24% -76.99% -83.42% -89.90% -96.21% -102.37% -109.17% -115.70%
Accumulated other comprehensive income (loss) -3.74% 0.56% -13.45% -13.02% -12.49% -12.08% -11.72% -11.41% -11.21% -11.02%
Total Corning Incorporated shareholders' equity 268.17% 270.65% 222.12% 225.38% 225.93% 230.01% 235.19% 241.84% 247.93% 253.82%
Minority / Noncontrolling interests 0.59% 0.63% 0.75% 0.73% 0.70% 0.67% 0.65% 0.64% 0.63% 0.62%
Total equity 268.76% 271.28% 222.87% 226.11% 226.63% 230.69% 235.85% 242.48% 248.56% 254.43%
Total liabilities and Equity 366.64% 364.22% 309.45% 295.59% 292.74% 297.71% 299.88% 308.46% 311.66% 317.64%

Value Driver Estimation
Revenue 8012 7819 9715 10036 10461 10820 11150 11456 11658 11864
Less: Cost of Goods Sold 3715 3524 4496 4600 4814 4881 5040 5074 5047 5136
Less: Selling, General & Administrative Exp. 1205 1126 1211 1204 1255 1298 1338 1375 1282 1305
Less: Depreciation Expense 978 971 1167 1120 1149 1178 1204 1227 1249 1271
Less: Research and Development Exp. 769 710 815 803 837 866 892 916 933 949
Less: Amortization of Purchasesd Intangibles 19 31 33 33 32 32 32 32 32 32
EBITA 1326 1457 1993 2275 2374 2565 2644 2832 3116 3171
Plus: Operating Lease Interest 7 7 8 8 8 9 9 9 9 9
Adjusted EBITA 1333 1464 2001 2283 2383 2573 2653 2841 3125 3181
Adjusted Taxes
Marginal Tax Rate (from 10k) 32.40% 27.50% 31.60% 32.16% 32.16% 32.16% 32.16% 32.16% 32.16% 32.16%
Income Tax Provision 339 512 1096 1004 942 866 669 745 583 593
Plus: Tax Shield on Operating Lease Interest 2 2 3 3 3 3 3 3 3 3
Plus: Tax Shield on Interest Expense 36 33 39 44 46 45 49 46 50 48
Less: Tax on Interest/Investment Income 5 2 8 8 9 10 11 12 13 14
Plus: Tax Shield on Restructuring 43 18 22 15 54 10 43 52 21 21
Less: Tax on Non-Operating Income 289 334 548 502 473 449 433 420 265 252
Equity in Earnings of Affiliated Comp. 262 150 84 65 67 70 72 74 75 76
Other Income 27 183 464 437 405 380 362 347 190 175
Plus: Tax Shield on Asbestos Litigation 5 5 (3) 3 3 3 4 4 4 4
Total Adjusted Taxes 131 234 601 558 566 468 323 417 383 404
Change in Deferred Taxes 178 410 375 0 0 0 0 0 0 0
NOPLAT 1380 1639 1775 1725 1817 2106 2330 2424 2742 2777
Invested Capital
Operating Current Assets
Plus: Normal Cash 801 782 972 1004 1046 1082 1115 1146 1166 1186
Plus: Account Receivable 1302 1253 1501 1528 1674 1569 1516 1867 1795 1827
Plus: Inventory 1051 1270 1322 1334 1465 1655 1494 1466 1574 1602
Plus: Other Current Assets 619 855 1099 1064 1078 1093 1126 1157 1201 1222
Total Operating Current Assets 3773 4160 4894 4929 5262 5399 5252 5636 5736 5837
Operating Current Liabilities
Plus: Account Payable 779 771 997 1024 1057 1060 1082 1180 1177 1198
Plus: Total Accrued Expenses 819 815 1291 643 659 685 728 761 783 794
Accrued Wages 460 445 - 0 0 0 0 0 0 0
Other Accrued Liabilities 359 370 1291 643 659 685 728 761 783 794
Plus: Asbestos Litigation - - - - - - - - - -
Plus: Customer Deposits - - - - - - - - - -
Plus: Income Taxes Payable 282 139 - 0 0 0 0 0 0 0
Total Operating Current Liabilities 1880 1725 2288 1667 1716 1745 1809 1941 1961 1992
Net Operating Working Capital 1893 2435 2606 3262 3546 3654 3442 3695 3775 3845
Plus: Net PPE 10625 9801 12766 12445 12763 13092 13380 13634 13874 14120
Plus: PV of Operating Leases 179 162 202 197 202 207 212 216 220 224
Plus: Non-Goodwill Intangible Assets 522 540 497 502 513 487 479 475 472 469
Plus: Other LT Operating Assets 301 473 1722 853 785 649 468 390 525 534
Less: Customer Deposits - - - - - - - - - -
Less: Other Operating Liabilities 903 793 2046 1082 1088 1114 1126 1134 1131 1151
Invested Capital 12617 12618 15747 16177 16721 16975 16856 17276 17735 18040
VALUE DRIVERS
NOPLAT 1380 1639 1775 1725 1817 2106 2330 2424 2742 2777
Beginning Invested Capital 11758 12617 12618 15747 16177 16721 16975 16856 17276 17735
Return on Invested Capital (ROIC) 11.74% 12.99% 14.07% 10.96% 11.23% 12.59% 13.73% 14.38% 15.87% 15.66%
Beginning Invested Capital 11758 12617 12618 15747 16177 16721 16975 16856 17276 17735
ROIC-WACC 2.95% 4.21% 5.29% 2.17% 2.45% 3.81% 4.94% 5.59% 7.09% 6.87%
Economic Profit (EP) 347 531 667 342 396 637 839 943 1224 1219
NOPLAT 1380 1639 1775 1725 1817 2106 2330 2424 2742 2777
Change in Invested Capital 859 1 3129 430 544 254 (119) 420 459 305
Free Cash Flow 521 1639 (1354) 1296 1273 1852 2449 2003 2283 2472

Weighted Average Cost of Capital (WACC) Estimation
Risk-free rate 2.71%
Market Risk Premium 4.85%
Equity Beta of Firm 1.45
Cost of Equity (Re) 9.74%
YTMCorporate Bond- exp 2042 4.17%
Cost of Debt (Rd) 4.17%
MV of Common Stock 24.62
Shares Outstanding 1358 In Millions
Weight of Equity 35733.96
PV of Operating Leases 202.29
Current Portion of LT Debt 36
Market Value of LT Debt 3227
Convertible Preffered Stock 2300 In Millions
Total Debt 5765.29
Re 9.74%
Rd 4.17%
E 35733.96 WACC= 8.79%
D 5765.292
V 41499.25
(1-t) 68.40%
Wd 13.89%
We 86.11%
Weight of Debt (D)
WACC= Re(E/V)+Rd(1-t)(D/V)+Rpfd(PFD/V)
WACC Calculation
WACC= Re(E/V)+Rd(1-t)(D/V)+Rpfd(PFD/V)
Cost of Equity (Re)
Cost of Debt (Rd)
Weight of Equity (E)

Discounted Cash Flow (DCF) and Economic Profit (EP) Valuation Models
Key Inputs:
CV Growth 3.50%
CV ROIC 15.87%
WACC 8.79%
Cost of Equity 9.74%
Fiscal Years Ending Dec. 31 2015E 2016E 2017E 2018E 2019E
DCF Model
Free Cash Flow 1296 1273 1852 2449 2003
Contiuing Value 40439
Periods to Discount 1 2 3 4 5
Discounted FCF 1191 1075 1438 1749 27858
Sum of DCF's 33311
Plus: Excess Cash 4338
Plus: Short term investments 759
Plus: Long term investments 1801
Less: Total Debt (including PV OL) 5765
Less: ESOP 341
Less: Post Retirement benefit 814
Less: Asbestos Liability 681
Value of Equity 32608
Shares Outstanding 1358
Share Price 24.01
Price Today 24.54
EP Model
Invested Capital 15746.8
EP 342 396 637 839 943
Continuing Value 23163
Periods to Discount 1 2 3 4 5
Discounted EP 314 334 495 599 15822
Sum EP 17564
Beginning Invested Capital 15747
Plus: Excess Cash 4338
Plus: Short term investments 759
Plus: Long term investments 1801
Less: Total Debt (including PV OL) 5765
Less: ESOP 341
Less: Post Retirement benefit 814
Less: Asbestos Liability 681
Value of EP 32608
Share Outstanding 1358
Share Price 24.01
Price Today $24.54

Dividend Discount Model (DDM) or Fundamental P/E Valuation Model
Fiscal Years Ending Dec. 31 2015E 2016E 2017E 2018E 2019E 2020E
EPS 2.04 2.04 2.34 2.46 2.51 2.60
Key Assumptions
CV growth 3.50%
CV ROE 11.39%
Cost of Equity 9.74%
Future Cash Flows
P/E Multiple (CV Year) 11.10
EPS (CV Year) 2.60
Future Stock Price 28.81
Dividends Per Share 0.61 0.61 0.70 0.74 0.75
1 2 3 4 5
Discounted Cash Flows 0.56 0.51 0.53 0.51 18.57
Intrinsic Value 20.68$
Pice Today 21.13$

Relative Valuation Models
EPS EPS Est. 5yr
Ticker Company Price 2015E 2016E P/E 15 P/E 16 EPS gr. PEG 15 PEG 16
MMM 3M $169.61 $8.19 $9.00 20.4 18.8 9.0 2.27 2.09
ENS ENERSYS $65.42 $4.30 $4.68 15.2 14.0 13.0 1.17 1.08
TEL TE CONNECTIVITY $72.38 $4.22 $4.59 17.2 15.8 11.4 1.50 1.38
APH Amphenol Corp. $56.80 $2.48 $2.72 22.9 20.9 10.0 2.29 2.09
Average 18.9 17.4 1.8 1.7
GLW Corning Incorporated $24.62 $2.04 $2.04 12.1 12.1 6.67 1.8 1.8
Implied Value:
Relative P/E (EPS15) $ 38.54
Relative P/E (EPS16) 35.36$
PEG Ratio (EPS15) 24.56$
PEG Ratio (EPS16) 22.53$

Key Management Ratios
Liquidity Ratios
Current Ratio 4.96 5.09 4.41 6.37 6.35 6.27 7.41 6.79 7.77 8.04
= Current Assets/ 9695 8891 10238 10846 11346 12547 13433 14899 15234 16015
Current Liabilities 1956 1746 2324 1703 1787 2002 1812 2194 1961 1992
Quick Ratio 4.42 4.36 3.84 5.59 5.53 5.44 6.59 6.12 6.97 7.24
=(Current Assets-Inventory)/ 8644 7621 8916 9512 9881 10892 11939 13433 13660 14413
Cash Ratio 3.14 3.00 2.61 3.92 3.85 3.99 4.99 4.63 5.31 5.58
=(Cash + Short-Term or Marketable Securities )/ 6144 5235 6068 6672 6882 7982 9048 10160 10416 11116
Activity or Asset-Management Ratios
Inventory Turnover 4.47 3.54 4.28 4.29 4.07 3.66 4.18 4.30 4.00 4.00
=Cost of Goods Sold/ 4693 4495 5663 5720 5963 6059 6244 6301 6295 6407
Inventory 1051 1270 1322 1334 1465 1655 1494 1466 1574 1602
Receivables Turnover 6.15 6.24 6.47 6.57 6.25 6.90 7.35 6.13 6.49 6.49
=Sales/ 8012 7819 9715 10036 10461 10820 11150 11456 11658 11864
Account Receivable 1302 1253 1501 1528 1674 1569 1516 1867 1795 1827
Total Assets Turnover 0.27 0.27 0.32 0.34 0.34 0.34 0.33 0.32 0.32 0.31
=Sales/ 8012 7819 9715 10036 10461 10820 11150 11456 11658 11864
Total Assets 29375 28478 30063 29665 30624 32211 33436 35337 36334 37686
Financial Leverage Ratios
Debt/Equity 0.36 0.34 0.39 0.31 0.29 0.29 0.27 0.27 0.25 0.25
=Total Liabilities/ 7842 7267 8411 6973 6916 7252 7139 7559 7357 7499
Total Equity 21533 21211 21652 22692 23709 24960 26297 27779 28977 30187
Debt Ratio 0.27 0.26 0.28 0.24 0.23 0.23 0.21 0.21 0.20 0.20
=Total Liabilities/ 7842 7267 8411 6973 6916 7252 7139 7559 7357 7499
Total Assets 29375 28478 30063 29665 30624 32211 33436 35337 36334 37686
Interest Coverage Ratio 10.62 11.43 15.70 16.32 15.32 18.14 16.53 18.53 19.62 20.76
=Opearating Income/ 1179 1371 1931 2220 2198 2522 2499 2660 3039 3093
Interest Expense 111 120 123 136 143 139 151 143 155 149
Profitability Ratios
Net Profit Margin 20.42% 25.08% 25.45% 26.55% 24.94% 27.22% 27.44% 27.18% 27.14% 26.78%
=Net Income/ 1636 1961 2472 2665 2609 2945 3060 3114 3164 3177
Net Sales 8012 7819 9715 10036 10461 10820 11150 11456 11658 11864
Return on Assets 5.57% 6.89% 8.22% 8.98% 8.52% 9.14% 9.15% 8.81% 8.71% 8.43%
=Net Income/ 1636 1961 2472 2665 2609 2945 3060 3114 3164 3177
Total Assets 29375 28478 30063 29665 30624 32211 33436 35337 36334 37686
Return on Equity 7.60% 9.25% 11.42% 11.74% 11.01% 11.80% 11.64% 11.21% 10.92% 10.53%
=Net Income/ 1636 1961 2472 2665 2609 2945 3060 3114 3164 3177
Total Equity 21533 21211 21652 22692 23709 24960 26297 27779 28977 30187
Payout Policy Ratios
Dividend Payout Ratio 0.31 0.30 0.31 0.31 0.31 0.31 0.30 0.30 0.31 0.30
=Dividends/ 500 583 755 830 799 900 928 939 965 968
Net Income 1636 1961 2472 2665 2609 2945 3060 3114 3164 3177
Total Payout Ratio 0.76 0.97 1.37 0.69 0.69 0.65 0.63 0.62 0.62 0.62
=Dividends + Repurchases / 1249 1909 3383 1830 1799 1900 1928 1939 1965 1968
Net Income 1636 1961 2472 2665 2609 2945 3060 3114 3164 3177

24.54 2.75% 3.00% 3.25% 3.50% 3.75% 4.00% 4.25% 4.50% 24.54 2.75% 3.00% 3.25% 3.50% 3.75% 4.00% 4.25% 4.50%
8.49% 24.38 24.89 25.45 26.06 26.74 27.49 28.34 29.29 10.00% 25.66 26.18 26.74 27.36 28.04 28.79 29.63 30.56
8.59% 23.93 24.42 24.94 25.52 26.16 26.87 27.67 28.55 10.50% 25.02 25.52 26.06 26.66 27.31 28.03 28.83 29.73
8.69% 23.50 23.96 24.46 25.01 25.61 26.28 27.02 27.86 11.00% 24.38 24.86 25.38 25.95 26.58 27.27 28.03 28.89
WACC 8.79% 23.09 23.52 23.99 24.51 25.08 25.71 26.41 27.19 SG&A (2015) 11.50% 23.74 24.20 24.70 25.24 25.84 26.50 27.24 28.06
8.89% 22.68 23.10 23.55 24.04 24.57 25.17 25.82 26.56 12.00% 23.11 23.54 24.02 24.54 25.11 25.74 26.44 27.22
8.99% 22.29 22.69 23.11 23.58 24.08 24.64 25.26 25.95 12.50% 22.47 22.88 23.33 23.83 24.37 24.97 25.64 26.39
9.09% 21.92 22.29 22.69 23.13 23.61 24.14 24.72 25.37 13.00% 21.83 22.22 22.65 23.12 23.64 24.21 24.84 25.55
9.19% 21.55 21.91 22.29 22.70 23.16 23.66 24.21 24.81 13.50% 21.19 21.56 21.97 22.42 22.91 23.45 24.05 24.72
14.00% 20.55 20.90 21.29 21.71 22.17 22.68 23.25 23.88
24.54 2.75% 3.00% 3.25% 3.50% 3.75% 4.00% 4.25% 4.50% 24.54 2.75% 3.00% 3.25% 3.50% 3.75% 4.00% 4.25% 4.50%
1.30 25.92 26.53 27.20 27.94 28.77 29.70 30.74 31.93 6.00% 25.66 26.18 26.74 27.36 28.04 28.79 29.63 30.56
1.35 24.91 25.46 26.05 26.71 27.44 28.25 29.16 30.19 6.50% 25.02 25.52 26.06 26.66 27.31 28.03 28.83 29.73
1.40 23.98 24.46 24.99 25.58 26.22 26.94 27.74 28.63 7.00% 24.38 24.86 25.38 25.95 26.58 27.27 28.03 28.89
BETA 1.45 23.11 23.54 24.02 24.54 25.11 25.74 26.44 27.22 R&D (2015) 7.50% 23.74 24.20 24.70 25.24 25.84 26.50 27.24 28.06
1.49 22.45 22.85 23.29 23.76 24.28 24.85 25.48 26.19 8.00% 23.11 23.54 24.02 24.54 25.11 25.74 26.44 27.22
1.55 21.53 21.89 22.27 22.68 23.13 23.63 24.17 24.78 8.50% 22.47 22.88 23.33 23.83 24.37 24.97 25.64 26.39
1.60 20.82 21.14 21.48 21.85 22.25 22.69 23.18 23.71 9.00% 21.83 22.22 22.65 23.12 23.64 24.21 24.84 25.55
1.65 20.15 20.44 20.75 21.08 21.44 21.83 22.26 22.73 9.50% 21.19 21.56 21.97 22.42 22.91 23.45 24.05 24.72
1.7
24.54 2.75% 3.00% 3.25% 3.50% 3.75% 4.00% 4.25% 4.50% 24.54 2.75% 3.00% 3.25% 3.50% 3.75% 4.00% 4.25% 4.50%
55.00% 25.66 26.18 26.74 27.36 28.04 28.79 29.63 30.56 120.00% 23.53 23.98 24.48 25.01 25.60 26.26 26.98 27.79
55.50% 25.02 25.52 26.06 26.66 27.31 28.03 28.83 29.73 121.00% 23.43 23.87 24.36 24.89 25.48 26.13 26.85 27.65
COGS (2015) 56.00% 24.38 24.86 25.38 25.95 26.58 27.27 28.03 28.89 122.00% 23.32 23.76 24.25 24.77 25.36 26.00 26.71 27.51
56.50% 23.74 24.20 24.70 25.24 25.84 26.50 27.24 28.06 123.00% 23.21 23.65 24.13 24.66 25.23 25.87 26.57 27.36
57.00% 23.11 23.54 24.02 24.54 25.11 25.74 26.44 27.22 PPE ( % of sales) 124.00% 23.11 23.54 24.02 24.54 25.11 25.74 26.44 27.22
57.50% 22.47 22.88 23.33 23.83 24.37 24.97 25.64 26.39 125.00% 23.00 23.43 23.90 24.42 24.98 25.61 26.30 27.08
58.00% 21.83 22.22 22.65 23.12 23.64 24.21 24.84 25.55 126.00% 22.89 23.32 23.79 24.30 24.86 25.48 26.17 26.94
58.50% 21.19 21.56 21.97 22.42 22.91 23.45 24.05 24.72 127.00% 22.78 23.21 23.67 24.18 24.74 25.35 26.03 26.80
59.00% 20.55 20.90 21.29 21.71 22.17 22.68 23.25 23.88 128.00% 22.68 23.10 23.56 24.06 24.61 25.22 25.90 26.65
CV GROWTH
CV GROWTH
CV GROWTH
CV Growth CV GROWTH
CV GROWTH

Corning, inc. GLW fin

Recommended

Recommended

More Related Content

What's hot

What's hot (13)

Similar to Corning, inc. GLW fin

Similar to Corning, inc. GLW fin (20)

Corning, inc. GLW fin