This post is part of our Big Company, Small Town series, featuring large companies and the small towns in which they are headquartered.
Rest assured, the first decade of the 21st century is not likely to be remembered as a renaissance period in U.S. history. No one will confuse this decade with the Roaring '20s or even the Wonderful '90s.
Further, if the nation needs an example of rebirth and renewal -- it would be hard to find a better one than the story of multinational corporation Corning (NYSE: GLW), nestled in the small town of Corning, New York.
Corning is your classic, feel-good American success story. And doesn't the United States need a few of those today?
Moreover, Corning, arguably, represents one of the signature corporate transformation stories of the digital age.
From cookware to fiber optics to LCDs
Formerly a primarily glass and cookware company, (who doesn't remember that ubiquitous Corning cookware that was safe for microwave ovens?), Corning successfully transformed itself first into a fiber optic company in the 1990s.
MOST NOTEWORTHY: Corning, BTU International and RiskMetricks were today's noteworthy initiations:
ThinkPanmure believes Corning (NYSE: GLW) is well-positioned to benefit from increased penetration of LCD panels into televisions, flat panel monitors, notebooks, and mobile handsets. Shares were initiated with an Accumulate rating and $31 target.
Thomas Weisel said BTU International (NASDAQ: BTUI) is seeing strong order trends for the company's high margin solar sales in its in-line diffusion furnace and metallization products. The firm started shares with an Overweight rating and $15 target.
RiskMetrics (NYSE: RMG) was assumed at JMP Securities with an Ootperform rating and $26 target. The firm expects RMG to benefit from greater focus on managing portfolio risk and on corporate governance issues.
OTHER INITIATIONS:
Intel (NASDAQ: INTC) was initiated at ThinkPanmure with a Buy rating and $29 target.
Gen-Probe (NASDAQ: GPRO) was assumed at William Blair with an Outperform rating.
Baird initiated BJ's Restaurants (NASDAQ: BJRI) with a Neutral rating and $13 target.
Readers of this space know that my investment bias is toward large-cap companies with demonstrated business models and which have a competitive advantage in established markets, preferably with a favorable global trend as a support. In general, turnaround and business model change plays are avoided, but there are exceptions to the rule, and one is Corning.
Corning Inc. (NYSE: GLW), once a reliable but slow-growth kitchenware and cookware company, today represents one of the signature corporate transformation stories of the digital age.
Corning is one of the leading providers of fiber-optic cable, which the company invented more than 30 years ago. Further, its substrates business did not draw Wall Street's attention until technological advances enabled the price-competitive production of flat panel displays in flat panel televisions, desktop monitors and notebook computers.
"Showing big gains in the world of video, LCD TV panel maker AU Optronics reported revenue of $4.5 billion in its first quarter, marking a 12.1% quarter-over-quarter decline that seemed to square with normal seasonality, even as it was negatively affected by the weaker U.S. dollar.
"Earnings thus came in at $1.12 per U.S. ADR, vastly improved from the loss of $0.02 per ADR in the same quarter last year. Looking forward, management says sales of TVs yet have not been impacted by the slowdown, though they are cautiously watching the markets for signs of weakness.
"Pleased with the positive report, we remain buyers of the shares, which trade at just about 6 times the consensus average for earnings per ADR now showing on Reuters Estimates.
Corning (NYSE: GLW) shares are falling today after the Labor Department reported that outside of food and energy, prices rose by 0.4% last month, which was double what analysts had expected. For the full year, inflation was the highest it has been since 1991. As costs for everyday goods increase, fewer people will be interested in purchasing major electronics which need LCDs from Corning. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on GLW.
After hitting a one-year low of $20.04 in January, the stock has risen to make a one-year low of $28.07 this month. This morning, GLW opened at $27.68. So far today the stock has hit a low of $26.94 and a high of $27.68. As of 12:00, GLW is trading at $26.98, down 0.79 (-2.8%). The chart for GLW looks bullish and steady, while S&P gives the stock its highest 5 STARS (out of 5) strong buy rating.
For a bearish hedged play on this stock, I would consider a July bear-call credit spread above the $30 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 6.4% return in nine weeks as long as GLW is below $30 at July expiration. Corning would have to rise by more than 10% before we would start to lose money. Learn more about this type of trade here.
Selling Off the Core Business It was quite a surprise to some this week to hear that GE is looking to sell their signature product line --appliances. But, they aren't the first company to move away from their early roots. Here are some companies that decided to cut their roots-the products that fed their early growth to delve into other areas. Companies have mixed results when they stray from their original visions, sometimes stumbling to adjust and others morphing into better creations. Among the companies are IBM which sold off their PC unit, Corning and Corningware, Kodak and 35MM Film, Goodrich and tires and more. Selling off the core business - BusinessWeek In the News: GE Confirms It Is Considering Strategic Options for Its Appliance Unit
Stocks futures were lower early Wednesday morning as investors awaited not only a rate decision from the Federal Reserve this afternoon but several key economic indicators and lots of corporate earnings too.
U.S. stock markets ended mostly lower on Tuesday. While the Dow Jones Industrial Average ended down 39 points, or 0.31%, the S&P 500 ended 5 points lower, or 0.39%. Only the heavily tech weighted Nasdaq Composite rose 1.7 points, or 0.07% due to a lift from upbeat earnings from Corning.
Today, investors will focus their attention on different items throughout the day as they await the Fed decision coming at 2:15 p.m. EDT when the Fed releases its policy statement. Most expect the Federal Reserve to cut key rates by a quarter point to 2%, but to hint at a pause in the cuts.
Before the bell, Wall Street will also look at earnings from heavyweights such as General Motors, Procter & Gamble and Time Warner. PG and TWX already reported results.
Procter & Gamble (NYSE: PG) reported that first-quarter profit rose 8% o $2.71 billion, or 82 cents per share as cost control and price increases helped offset higher commodity costs. Revenue rose 9% to $20.46 billion. Analysts predicted profit of 81 cents per share on revenue of $20.43 billion.
Time Warner Inc. (NYSE: TWX)'s first-quarter profits fell 36% following an asset sale a year ago, and the company also said it will spin off the rest of its cable business. Excluding one-time effects, per-share results were 22 cents per share, a penny below analyst estimates and in line with a year ago. Revenues rose 2% to $11.42 billion from $11.18 billion.
Despite today's major markets showing a drop, this would really look like another mixed day on fairly light trading volume as profits fight economic numbers. Oil fell more than $3.00 per barrel and consumer confidence came in at a 5-Year low. Foreclosures also have risen by more than 100% with what now appears to be 1 home per 194 that are in foreclosure. All this is one day ahead of the FOMC meeting with the decision to raise rates, and one day after Warren Buffett called a recession already here. Below are the unofficial closing prices for major US index averages:
Merck & Co. (NYSE: MRK) shares are dropping over 8% in premarket trading after it said its cholesterol pill Cordaptive failed to win approval from the U.S. Food and Drug Administration, less than a week after it was recommended for marketing in the European Union. While Merck intends to submit more data to the FDA, it is unclear it will succeed given even some European doctors said more research is needed on one of the drug's main components safety.
Who said higher oil prices aren't good? If you ask Royal Dutch Shell (NYSE: RDS.A) and BP (NYSE: BP), high oil prices are fantastic as the two oil giants beat forecasts when posting quarterly earnings Tuesday, reporting that net income, excluding unrealized gains from changes in inventory values, rose 12% to a record $7.8 billion and 48% to $6.6 billion respectively. Shell shares are climbing 5.7% in premarket trading and BP's over 4.8% as it seems investors think oil above $100 a barrel is here to stay.
Archer Daniels Midland Co. (NYSE: ADM), the world's largest grain processor, said third-quarter profit rose 42% to $517 million or 80 cents per share, topping analyst estimates of 69 cents per share, as it traded more grains and crushed more soybeans. Sales climbed 64% to $18.7 billion. Seems that being in agriculture lately is a positive and ADM shares are rising 3.75% in premarket trading.
After hitting a one-year high of $27.25 in July, the stock hit a one-year low of $20.04 in January. This morning, GLW opened at $25.50. So far today the stock has hit a low of $24.95 and a high of $25.70. As of 12:45, GLW is trading at $24.91, down $0.82 (-3%). The chart for GLW looks bullish and steady, while S&P gives the stock its highest 5 STARS (out of 5) strong buy rating.
For a bearish hedged play on this stock, I would consider an August bear-call credit spread above the $30 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 6.5% return in four months as long as GLW is below $30 at August expiration. Corning would have to rise by more than 20% before we would start to lose money.
MOST NOTEWORTHY: O'Reilly Automotive, Corning and Lincoln National were today's noteworthy downgrades:
William Blair downgraded O'Reilly Automotive (NASDAQ: ORLY) to Market Perform from Outperform following weak Q1 results, citing the potential for further downward EPS revisions.
Thomas Weisel downgraded Corning Inc. (NYSE: GLW) to Market Weight from Overweight citing balanced risk/reward given the backdrop of a maturing LCD penetration and generational upgrade cycle, and the challenging environment.
Wachovia downgraded Lincoln National Corp. (NYSE: LNC) to Market Perform from Outperform as they believe the weak Q1 market weakness will impact profitability.
"Now 157 years old, Corning (NYSE: GLW) has come from window making to sit at the forefront of two of the fastest-growing segments of the technology space: flat panel TVs and fiber-optic," says tech expert Mark Mowrey.
In The Prudent Speculator TechValue Report, the advisor explains his bullishness on Corning, which has shown a "long-time commitment to future-focused research and development."
"For both its TV and fiber optics markets, the company supplies glass. We're not talking dinnerware, though. Rather, the company is the leader in selling flat panel display glass and fiber-optic cabling. is testament to
"In addition Corning maintains an Environmental Technologies business, which develops emissions and pollution control products, and a Life Sciences business, where the company makes lab glass and drug testing products.
"For the past three quarters, revenue has been growing at a double-digit pace overall, hitting $1.58 billion in the final quarter of last year, as both the Display Technologies and Telecommunications businesses made up for relative weakness in Environmental Technologies.
"Yet, the stock's forward earnings multiple has trended steadily downward, we suppose, as fears increase that both those markets eventually will prove less profitable as competition increases. On the contrary, we think end-market growth will hasten, while Corning's technological lead expands.
As chairman and CEO of Countrywide Financial Corporation (NYSE: CFC), Angelo Mozilo refused to take pay cuts, according to a report by a House committee, and reported by the Wall Street Journal. The focus of a meeting today with the House Committee on Oversight and Government Reform on executive compensation at companies involved in the subprime fiasco will be on Mozilo, who was paid about $250M between 1998 and 2007, plus $406M from his sale of Countrywide shares.
The Wall Street Journal also reported that Corning Incorporated (NYSE: GLW) is looking to sell crystal business Steuben Glass, a unit that has lost $30M over the last five years. If Corning cannot find a buyer for the unit, executives said they will consider other options, including closing Steuben.
OTHER PAPERS:
After failing to meet repayment requests, the UK Times reported that Carlyle Capital Corp Limited (OTC: CARYF), the Dutch-listed affiliate of U.S. private-equity firm Carlyle Group, held emergency restructuring talks with its banks Thursday evening. CCC disclosed that it had received one default notice after receiving margin calls for over $37M from banks since Wednesday but was "unable to meet the demands" of several. The firm expects "at least one" more default notice.
WEB SITES:
Despite shedding several units, Vikram Pandit, Citigroup Incorporated's (NYSE: C) CEO, denied rumors that the bank could put its unit in South Korea up for sale. According to sources, Pandit, currently reviewing operations in an effort to boost earnings and cut costs, said "absolutely no" when directly asked about a divestiture, Reuters reported.
This post is part of our Big Company, Small Town series, featuring large companies and the small towns in which they are headquartered.
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Readers of this space know that my investment bias is toward large-cap companies with demonstrated business models and which have a competitive advantage in established markets, preferably with a favorable global trend as a support. In general, turnaround and business model change plays are avoided, but there are exceptions to the rule, and one is Corning. 
Here are some highlights from this past week's 
Stocks futures were lower early Wednesday morning as investors awaited not only a rate decision from the Federal Reserve this afternoon but several key economic indicators and lots of corporate earnings too. .gif){kind=logo}
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