There was some interesting news that was, not surprisingly, overshadowed by the somewhat wild ride markets took on Tuesday. In fact, volatility has become the focus now -- after all, it is October, and we know what has happened historically to markets in the month of October.
Corning Swings
First, within the mainstream, Corning Inc. (GLW) put up decent third-quarter results, with earnings coming in $0.3 ahead of the $0.48 consensus, while revenue was in line with expectations. Full-year revenue guidance of $11.3 billion is more than 10% ahead of last year's revenue.
You would have thought it was a bad quarter, based on Tuesday's early action in the stock, however. GLW opened down 5%, but ended the day up 2%, for a 7% swing. That's one of the still-fascinating attributes of our markets -- the opportunities that are sometimes provided that suggest the markets are not always as efficient as many believe.
GLW ended the quarter with $1.9 billion in cash and continued returning cash to shareholders, not just via dividends but through the repurchase of nearly $400 million worth of stock during the quarter. That has been a continuing theme -- growing dividends and stock buybacks -- which have equated to $11.4 billion returned to shareholders since 2015. I continue to be a fan of situations where companies simultaneously buy back stock and raise the dividend.
It will be interesting to see what the company does with the dividend in 2019. Since 2015, GLW has typically raised it early in the year -- last year there was a 16% increase to $0.18 a quarter. Over the past four years, the dividend has increased 80%, which equates to a 15.8% compound annual growth rate.
Rough Ride for Big 5
Within the underbelly of small-caps, retailer Big 5 Sporting Goods (BGFV) , a member of my 2018 Double Net Value Portfolio, was dropped from the S&P SmallCap 600 Index to make room for Akorn (AKRX) , which is rising from the S&P MidCap 400 Index. After being up 1% in regular trading, Big 5 dropped about 4% after the Tuesday post-market close announcement. Shares will likely face additional pressure as funds benchmarked to the index jettison their BGFV shares.
BGFV, which currently trades at just 1.27x net current asset value, has had a tough run since June, and is down about 35% since then. Shares currently yield a whopping 11.2%, which is simply the market's way of voting that there may be a dividend cut on the way. The last time we saw a similar situation in retail was when a depressed Cato Corp was yielding about 11.7% last February. The difference was that CATO had a boatload of cash, which BGFV does not have.
Still, following a couple of rough quarters, BGFV is expected to be profitable for the third quarter and is trading at less than 14x next year's "consensus" (just 2 analysts cover the name). We'll get the next progress report when the company reveals third-quarter results next week. The small consensus is forecasting $276 million in revenue, and earnings of $0.19 per share.
