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Why Corning Stock Is Falling After An Initial Surge Today
Corning (NYSE: GLW) stock is losing ground Wednesday despite an initial bullish surge early in the day's trading. The company's share price was down 2.4% as of 3:45 p.m. ET, but it had been up as much as 8% earlier in the session.
Corning stock jumped early thanks to better-than-expected fourth-quarter results and forward guidance, but it lost ground in response to a pair of bearish catalysts. Despite the strong start, uncertainty surrounding the new DeepSeek R1 artificial intelligence (AI) model and the Federal Reserve's latest interest rate move and commentary prompted a pullback.
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Corning delivers encouraging Q4 results and Q1 outlook
Corning published its Q4 results before the market opened this morning, delivering sales and earnings for the period that came in ahead of Wall Street's targets. The business posted non-GAAP (adjusted) earnings per share of $0.57 on revenue of $3.87 billion in the period, topping the average analyst estimate's call for per-share earnings of $0.56 on sales of $3.77 billion. Revenue in the period was up roughly 18% year over year, and adjusted earnings soared 46% compared to the prior-year period.
But even with the strong Q4 numbers, Corning stock is seeing sell-offs today due to uncertainty in the AI space and macroeconomic risks. Investors still aren't sure what to make of of DeepSeek R1 -- a new AI model from a Chinese company that is reportedly far more efficient than OpenAI's most advanced commercially available ChatGPT system.
Corning provides specialized glass and other fiber optics technologies that are used in AI data centers. If advanced AI systems come to require less data center hardware, it could mean that the company faces a weaker growth outlook than previously anticipated.
Adding another bearish catalyst, the Federal Reserve has opted to keep the benchmark interest rate at its current level. Technology investors have been hoping for more rate cuts this year because tech stocks and stocks in general tend to perform much better in a low interest rate environment.
While the absence of a rate cut at today's meeting was broadly expected, investors are concerned that inflationary pressures could mean no additional rate cuts this year -- or that the benchmark rate could actually be increased. As a result, the S&P 500 index was down 0.4% as of 3:45 p.m. ET, and the Nasdaq Composite index was down 0.5%.
What comes next for Corning?
For the first quarter, Corning is guiding for core sales to increase 10% year over year to roughly $3.6 billion. Meanwhile, core earnings per share are projected to come in between $0.48 and $0.52 -- good for growth of roughly 30% at the midpoint of the target range. The guidance came in significantly better than the average Wall Street target, which had called for per-share earnings of $0.48 in the period.
Corning also said that it will provide more details about its Springboard sales growth initiative at an investor event scheduled for March 18. The company is rolling out pricing increases for its display technologies segment and anticipates that the segment will post a 25% net income margin and between $900 million and $950 million in profit this year. With the stock pulling back despite strong earnings results and guidance, today's move could be a buying opportunity.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool recommends Corning. The Motley Fool has a disclosure policy.
