Corning Signs Deal To Buy 3M's Communication Unit

Corning Incorporated GLW recently announced that it has agreed to take over 3M Company's MMM Communication Markets Division completely in an all-cash deal for approximately $900 million. The acquisition is expected to be completed during 2018, subject to customary closing conditions, including regulatory approvals.

Headquartered in Austin, TX, 3M's Communication Markets Division provides optical fiber products and high bandwidth connectivity solutions for the telecommunications industry. The company has annual worldwide sales of approximately $400 million.

This strategic move is in line with Corning's plan to invest $1-$3 billion in acquisitions. Moreover, the company expects the deal to add 7-9 cents to 2019 earnings.

Post the deal, 3M's unit will be a part of Corning`s Optical Communications segment. The acquisition will result in adding around 500 3M's employees to Corning.

This acquisition will strengthen Corning's Optical Communications worldwide market access. We believe that 3M's high bandwidth and optical fiber products combined with Corning's global optical passive components and solutions will enable the latter to expand its broad portfolio of high-bandwidth optical solutions. This in turn will enhance customer experience resulting in additional revenues for Corning.

Considering growth witnessed by the Optical Communications market in the last few years, this deal will boost Corning's revenues and increase overall market share. In the recently reported third-quarter 2017 results, Optical Communications segment generated 35.3% of total revenues. Reported segment revenues increased 15.3% year over year and 4% on a sequential basis to $917 million on the back of strong demand for both enterprise and carrier products.

Share Price Momentum to Continue

Corning has outperformed the industry on a year-to-date basis. While the industry gained 21.4%, the stock returned 37.1%.

Last Word

Corning is a worldwide provider of connectivity solutions. The company has been supplementing its portfolio with various acquisitions.

We believe that growing demand for Corning's fiber optics products, as reflected by the Verizon Communications Inc VZ deal, which was signed in April.  Moreover, strong demand for Gorilla Glass 5 (GG5) is a key catalyst.

These along with strategic acquisitions like SpiderCloud, Gerresheimer's Pharmaceutical Glass Tubing Business, Alliance Fiber Optic Products and STRAN Technologies will aid the stock sustain its momentum in the rest of 2017.

Zacks Rank & Stock to Consider

Currently, Corning carries a Zacks Rank #3 (Hold).

A better-ranked stock in the technology sector is NVIDIA Corporation NVDA, which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

The long-term earnings growth rate for NVIDIA is projected to be 10.25%.

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