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Better Buy: Corning Incorporated vs. Apple

Choosing between Apple (NASDAQ: AAPL) and Corning Incorporated (NYSE: GLW) is a bit like having to choose your favorite parent, considering the two companies work together. 

In fact, Apple announced in May that it would give $200 million to Corning as part of its one billion dollar Advanced Manufacturing Fund to help encourage American manufacturing innovation. 

For those unfamiliar with Corning, it makes the glass screens for Apple and other smartphone manufacturers. However, it makes the bulk of its money from manufacturing optical fiber for telecom companies and internet service providers.

Granted, comparing Apple and Corning is also a bit like comparing Mt. Everest to your favorite neighborhood sledding hill. Apple has a market cap of $873 billion, while Corning's market cap is a significantly more modest $27.2 billion. 

However, Corning is nothing to balk at considering its stock is up 29% in 2017 and up 165% in the past five years. Apple, which just released a new iPhone lineup, is up 46% in 2017 and up just 96% in the past five years. 

Let's take a closer look at Apple and Corning. 

Apple has had tremendous success selling its services to its estimated 715 million iPhone users. Image source: Apple

Apple's ecosystem still going strong

Billionaire investor Warren Buffett said during an interview on CNBC in February that he thinks Apple will be the first company to reach a $1 trillion valuation.

When you look at its growth story since it went public in 1980, it's easy to see why. If you bought 23 shares of Apple in 1980 and held onto them until today, you'd be sitting on a healthy cash pile of $217,723.52. 

Apple has managed to create fans out of its customers, or people who will sleep in a tent on the sidewalk just to be one of the first people to hold the newest iPhone. It's safe to say that Apple's smartphone business has been a phenomenon. In July 2016, Apple CEO Tim Cook announced that the company had sold its one billionth iPhone in less than ten years since its initial 2007 release. 

An estimated 715 million iPhones are currently being used around the world, BMO Capital Markets analyst Tim Long said in a recent note. That means Apple has 715 million people to push its services onto, including Apple Music subscriptions, App Stores sales and iCloud sales. The Apple ecosystem is the lifeblood of Apple. 

Apple's enormous reach means its balance sheet is impressive. Period. 

The Cupertino, Calif.-based tech giant has a cash pile of over $261.5 billion to play with compared with $256.8 billion in the previous quarter. That cash hoard will most likely continue to grow at an impressive rate with the release of the iPhone 8, iPhone 8 Plus, and iPhone X this fall, just in time for holiday gifting. 

While the company tends to be stingy with its M&A activity, it has also been known to give out generous dividends. Last quarter it declared a 63 cents per share dividend, which was the same as the previous quarter. 

Apple also provided positive guidance last quarter, predicting gross margin between 37.5% and 38% in addition to its ambitious revenue guidance between $49 billion and $52 billion. 

AAPL data by YCharts.

Corning continues gains despite lack of 'cool' Apple factor 

Corning, New York-based glass manufacturer Corning has been around since 1851, more than 100 years before the young Steve Jobs and Steve Wozniak founded Apple in 1976. 

While Corning may not have the 'cool' brand factor that draws in millions to its ecosystem, it's still reaping the benefits by providing the glass screens for those millions of iPhone users. 

On Oct. 24, Corning released its third quarter financial results that beat slightly on the top and bottom line. The company reported a 6% year-over-year increase in core sales to $2.7 billion. Earnings per share grew 2% year-over-year to 43 cents per share. Apple reported its latest figures on Nov. 2.

But when you look at specific segments, Corning's display technologies business suffered a 9% year-over-year decrease in core sales to $860 million due to the declining price of LCD glass. However, this was offset by Corning's optical communications business which saw sales increase 15% year-over-year to $917 million. 

Looking ahead, Corning said it expects optical communications to be a $5 billion per-year business by 2020. The company also anticipates growth in its display technologies, specialty materials and life sciences sales. 

Clearly, Corning has room to run -- maybe even another 165 years. 

It's also worth noting that Corning is still on track to fulfill its goal unveiled in late 2015 to return $12.5 billion to shareholders through repurchases and dividends by 2019. In addition, the company remains committed to investing $10 billion in research and development between the end of 2015 and 2019 to ensure that it stays on top of new growth opportunities. 

The verdict...

Apple reigns supreme over one of its many suppliers, Corning. 

While Corning has proved that it can adapt to changing technologies by surviving 165 years of business and still managing to grow nearly 30% this year, it can't beat the prospects Apple has ahead of it. 

Apple is often criticized for being overly reliant on iPhone sales. And while the new iPhone lineup should further increase the liquidity of this cash king, the company has a number of other growth opportunities. 

Apple is investing $1 billion in original content to help increase its Apple Music subscribers, who pay $9.99 per month. A boost in Apple Music subscribers would help the company hit its goal of $50 billion in services revenue by 2020.

In addition, the company is working on technology that can be integrated into cars to make them drive themselves. This is a worthwhile project considering the self-driving car market is expected to hit $42 billion in 2025, according to the Boston Consulting Group.

In other words, move over Grandpa, Apple is in the driver's seat. 

10 stocks we like better than Wal-Mart
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The author(s) may have a position in any stocks mentioned.

 

Natalie Walters has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends Corning. The Motley Fool has a disclosure policy.