Red-hot Corning shares slide on earnings. Why that's a gift to investors

Corning shares retreated Tuesday even as the glass maker reported better-than-expected earnings and announced two new long-term supply deals to support its AI infrastructure initiatives. The stock's massive rally this year has set a high bar for these results, but the long-term story remains solid. Core revenue for the three months ended March 31 rose 18% year over year to $4.35 billion, beating the $4.26 billion consensus estimate, according to LSEG. Growth was led by artificial intelligence and solar energy businesses. Adjusted earnings per share (EPS) rose 30% to 70 cents, a penny above expectations, according to LSEG data. Corning shares fell more than 7 percent to about $156 on Tuesday. At the day's low, the stock briefly traded below $150. GLW 1Y mountain Corning's 12-month stock performance. As a result, we were not at all surprised to see such market reactions on Tuesday. That was almost a certainty, given the meteoric rise in which Corning shares were up 92% year-to-date as of Monday's close. That's why we said on Monday that anyone looking to cut their stocks should go ahead. "If you want to make a profit [Corning]"It's a very overhyped stock right now," Jim Cramer said on Monday's Morning Meeting, adding: Fortunately, Tuesday's price action has tempered some of that excitement. This is a gift for investors who have not yet opened a position in Corning. Corning's results were admittedly not perfect, so why are we so encouraged? The main reason: The company has finalized two other long-term supply deals of "similar size". This deal, announced before earnings in January, will be worth up to $6 billion by 2030. Corning did not disclose the names of these two hyperscalers; CEO Wendell Weeks said it's up to customers to publicly discuss their supply chain commitments. Still, he said, "These deals are very important and share the risks and rewards of necessary expansions with our strategic customers." This structure, which is also used in the commodity agreement, means that Corning does not assume the risk of investing in new production capacity. In other words, Corning is investing with greater confidence, and this is a company that has clearly learned its lesson from the speculative fiber optic boom of the dot-com bubble. Headlines like the loss in operating margins and revenue guidance for the current quarter felt a bit weak. However, the stock is a buy on Tuesday as these deal announcements make it even clearer that Corning is a critical player in building trillion-dollar-plus AI infrastructure. Replacing copper cabling as a means of transmitting data can better accommodate the longer distances that data must travel in modern AI data centers. Thanks to this, Corning's Optical Communications segment is up an impressive 36% year-over-year in the quarter. The announcement of two new supply agreements, which are becoming an increasingly important part of the company's growth story, serve to confirm and solidify the stock's move this year. Additionally, the company's planned investor day in New York next week, where it plans to present a renewed multi-year growth outlook, will boost market confidence in financial forecasts later in the decade. But given we have a long earnings week ahead of us, especially on Wednesday night when four hyperscalers (Amazon, Alphabet, Meta, and Microsoft) will report, their results will certainly influence how the broader AI trade moves in the days ahead. Therefore, we will monitor the action for now and look for more details at next week's investor event in the hope of finding a better opportunity to push shares back up to 1. Communications increased 36% from the previous year to $1.85 billion. Additionally, the Solar segment grew 80% to $370 million in the fourth quarter. This marks the first time Corning has reported a Solar segment. “We have grown the company to the point where it now secures its own segment, which includes our solar and semiconductor polysilicon sales as well as our wafer and module businesses,” said Hemlock and Emerging Growth CFO Edward Schlesinger. Although it remains small, management has previously stated its intention to turn this into a $2.5 billion revenue opportunity. Corning is skipping some of these initial investments to scale the business, both growth and profitability should increase. Corning is targeting a 20% corporate operating margin target, and Weeks noted that Glass Innovations is another new reporting segment for the company, with the team now showing a modest 1% sales increase in the first quarter. We'll find sales to Apple for iPhone and Apple Watch glass, among other customers. "These businesses share core technologies, manufacturing capabilities and market access, and we have aligned them under a unified management structure to increase operational flexibility, improve efficiency and strengthen our leadership position in the markets we serve," Schlesinger said. Guidance Management is projecting core sales growth of approximately 14% for the current quarter, resulting in a revenue estimate of approximately $4.6 billion. Core earnings are expected to be between 73 cents and 77 cents per share. Notably, the team factored in an additional $30 million expense for the quarter due to extended maintenance at a solar facility. The company's Springboard goals have been achieved so far in 2028. management plans to expand its outlook to 2030 by investor day. The team also plans to introduce a new platform they call the "Photonics Market Access Platform" designed to serve prolific AI original equipment manufacturers (Jim Cramer's Charitable Trust is long GLW, AMZN, MSFT, META, and MSFT). By subscribing to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a transaction alert before buying or selling a stock in his charitable foundation's portfolio. If Jim talked about a stock on CNBC TV, he waits 72 hours after issuing the trading alert before executing the trade. OUR TERMS AND CONDITIONS AND PRIVACY POLICY DO NOT EXIST OR CREATE ANY OBLIGATION OR DUTY OF SECURITY IN CONNECTION WITH THE RECEPTION OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULT OR PROFIT CAN BE GUARANTEED.