While the global semiconductor shortage and supply chain crisis exacerbated by the Russia-Ukraine war could keep affecting the manufacturing of electronics components in the near term, growing government and private investments to address the chip shortage should help the industry gradually meet the high demand due to accelerated pace of digitization and increasing adoption of advanced technologies such as cloud computing, Internet of things (IoT), and artificial intelligence (AI). According to a Market Reports World report, the global electronic components market is expected to grow at a CAGR of 4.7% between 2022 and 2028. Therefore, both TE Connectivity Ltd. (TEL) and Corning Incorporated (GLW) should benefit.
TEL manufactures and sells connectivity and sensor solutions. The company operates through three segments: Transportation Solutions; Industrial Solutions; and Communications Solutions.
GLW manufactures specialty glass and ceramics. It operates through five segments — Display Technologies; Optical Communications; Environmental Technologies; Specialty Materials; and Life Sciences.
But which of these two stocks is a better buy now? Let’s find out.
Latest Developments
TEL announced that at the company's Annual General Meeting of Shareholders held on March 9, 2022, the shareholders approved that a dividend of $2.24 per share is distributed to shareholders in four equal quarterly installments of $0.56.
On February 2, 2022, GLW declared a quarterly dividend of $0.27 per share, a 12.5% increase versus the company’s previous quarterly common stock dividend. The dividend will be payable on March 30, 2022, to shareholders of record on February 28, 2022.
Recent Financial Results
TEL’s net sales increased 8% year-over-year to $3.80 billion for the fiscal first quarter ended December 24, 2021. The company’s net income came in at $566 million, representing a 48.6% year-over-year increase. Also, its EPS came in at $1.72, up 50.9% year-over-year.
GLW’s net sales increased 10% year-over-year to $3.68 billion for the fiscal fourth quarter ended December 31, 2021. The company’s net income grew 93% year-over-year to $487 million. Also, its EPS came in at $0.56, up 100% year-over-year.
Past and Expected Financial Performance
TEL’s tangible book value and total assets grew at CAGRs of 10.9% and 3.7%, respectively, over the past three years. Analysts expect TEL’s revenue to increase 5.5% in fiscal 2022 and 6.2% in fiscal 2023. The company’s EPS is expected to grow 9.7% in fiscal 2022 and 9% in fiscal 2023. Moreover, its EPS is expected to grow at a rate of 10.4% per annum over the next five years.
On the other hand, GLW’s tangible book value and total assets grew at CAGRs of 2% and 3.1%, respectively, over the past three years. The company’s revenue is expected to increase 6.7% in fiscal 2022 and 5.6% in fiscal 2023. Its EPS is expected to grow 13.5% in fiscal 2022 and 12.3% in fiscal 2023. Also, GLW’s EPS is expected to grow at a rate of 22.1% per annum over the next five years.
Profitability
TEL’s trailing-12-month revenue is 1.08 times what GLW generates. TEL is also more profitable, with an EBIT margin and net income margin of 18.35% and 16.07% compared to GLW’s 16.28% and 13.54%, respectively
Furthermore, TEL’s ROE, ROA, and ROTC of 23.19%, 8.37%, and 11.81% are higher than GLW’s 14.67%, 4.70%, and 6.74%, respectively.
Valuation
In terms of forward non-GAAP P/E, TEL is currently trading at 17.12x, 19.7% higher than GLW’s 14.30x. Moreover, TEL’s forward EV/EBITDA ratio of 11.80x is 45.9% higher than GLW’s 8.09x.
So, GLW is relatively affordable here.
POWR Ratings
TEL has an overall rating of B, which equates to a Buy in our proprietary POWR Ratings system. On the other hand, GLW has an overall rating of C, which translates to Neutral. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
TEL has a B grade for Stability. On the other hand, GLW has a C grade for Stability.
Of the 38 stocks in the Industrial - Manufacturing industry, TEL is ranked #11. In comparison, GLW is ranked #23.
Beyond what I’ve stated above, we have also rated both stocks for Growth, Value, Momentum, Quality, and Sentiment. Click here to view all the TEL ratings. Also, get all the GLW ratings here.
The Winner
The electronic components industry is growing exponentially with increasing reliance on smart gadgets to facilitate hybrid work. While both TEL and GLW are expected to gain, it is better to bet on TEL now because of its higher profit margin.
Our research shows that odds of success increase when one invests in stocks with an overall rating of Strong Buy or Buy. View all the other top-rated stocks in the Industrial - Manufacturing industry here.
GLW shares were trading at $33.79 per share on Wednesday afternoon, up $0.24 (+0.72%). Year-to-date, GLW has declined -8.63%, versus a -6.27% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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