Better Buy: Corning Incorporated vs. Apple Inc.

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Corning (NYSE: GLW) and Apple (NASDAQ: AAPL) are both storied American companies. The 167-year-old Corning has been one of the country's premier glassmakers, while Apple has redefined the personal computing and mobile device markets for much of its 41 years.

Today, Corning is also a top Apple supplier -- it's produced the toughened Gorilla Glass since the first iPhones in 2007, for one. Last year, it was also the recipient of $200 million from Apple's new Advanced Manufacturing Fund to support innovation.

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Investors likely consider Corning a much slower-growth stock than Apple, since it only climbed 3% over the past 12 months versus the tech giant's 26% gain. But looking ahead, is the latter still the stronger investment?

What do Corning and Apple do?

Corning makes a variety of glass, ceramics, optical networking, and LCD display products for a wide range of industries. Its optical communications and display technology units generated over 60% of its revenue last quarter.

The rest came from its three higher growth businesses: specialty materials, which produces Gorilla Glass; life sciences, which makes Valor Glass for scientific research; and environmental technologies, which sells gas particulate filters.

Apple's biggest moneymaker, of course, is still the iPhone, which generated 70% of its revenue last quarter. The rest came from the iPad, Mac, services (like iTunes, Apple Music, and Apple Pay), and other products (which include the Apple Watch, Apple TV, and Beats audio products).

The services and other products units -- which accounted for 16% of its revenue last quarter -- are growing much faster than its hardware businesses.

How fast are Corning and Apple growing?

Most of Corning's businesses generated consistent annual sales growth over the past few quarters. Its optical revenue was boosted by service providers and enterprise customers upgrading their networks. Corning also recently expanded this business by acquiring 3M's communications unit.

Strong smartphone sales supported its specialty materials unit, higher orders for Valor Glass strengthened its life sciences business, and tougher emissions standards for automakers generated higher sales of gas filters from its environmental tech unit. Display technologies, which posted ongoing sales declines due to cyclically weak demand for LCD screens was the only soft spot.

Wall Street expects Corning's revenue to rise 4% this year but for its earnings -- weighed down by higher spending and weak LCD prices -- to dip 1%.

As for Apple, many investors only watch its iPhone shipments, which slipped 1% annually last quarter. However, the higher prices of newer iPhones -- particularly the iPhone X -- boosted its total iPhone revenue by 13%. Meanwhile, its iPad shipments and revenue rose, but Mac shipments and revenue declined.

But software, not hardware, is the real story with Apple. Its expanding services ecosystem -- which includes iTunes, iCloud, Apple Music, and Apple Pay -- locks in users and offsets its slowing hardware sales by squeezing more revenue from existing users. Revenue from those services climbed 18% annually last quarter and accounted for 10% of Apple's top line.

Analysts expect Apple's revenue and earnings to rise 15% and 25%, respectively, this year.

Valuations and dividends

Corning trades at 15 times forward earnings, which is lower than the S&P 500's forward multiple of 17. However, Apple also has a forward P/E of 15, which seems irrationally low relative to its earnings growth potential.

Corning pays a forward dividend yield of 2.5%, and it's hiked that payout annually for seven straight years. Apple pays a lower forward yield of 1.4%, and it's raised the dividend annually for five straight years.

Apple is also expected to repatriate nearly all of its overseas cash (over $250 billion) in the near future -- which can be used on buybacks, dividends, or domestic acquisitions. Buybacks or acquisitions could significantly boost Apple's earnings, while higher dividends could make it more attractive to income investors.

The winner: Apple

I personally like (and own) Corning, but Apple is clearly a better buy at these levels. The company has a feverishly loyal user base, commands impressive pricing power in saturated markets, and is locking in more users with its ever-expanding ecosystem. Its stock is cheap, and its repatriated cash could transform the company and allay any concerns about slowing iPhone sales.

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Leo Sun owns shares of Corning. 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 3M and Corning. The Motley Fool has a disclosure policy.