Tuesday, January 25, 2011

Corning Inc. (NYSE: GLW): Q4 Earnings Preview 2010

Corning Inc. (NYSE: GLW), the world's largest manufacturer of liquid crystal displays, is scheduled to release fourth-quarter earnings before the market open on Tuesday, January 25, 2011. Analysts, on average, expect the company to report earnings of 47 cents per share on revenue of $1.59 billion. In the year-ago period, the company reported earnings of 44 cents per share on revenue of $1.53 billion.

Corning Incorporated manufactures and processes specialty glass and ceramics products worldwide. Corning manufactures and processes products at approximately 60 plants in 13 countries. Corning possesses considerable advantages in the market for LCD TV glass substrate. The company has developed great economies of scale, having continuously improved upon its manufacturing technology. Corning has developed one of the most efficient methods to produce the glass substrate and patented it, allowing for production of larger and thinner panels at lower cost. With this advanced technology, GLW has obtained a majority of glass market share, as it has been able to keep pace with the rising demands of its customers (Samsung, Phillips and Sony).

In the preceding third quarter, the Corning, New York-based company's net income was $785 million, or 50 cents per share, compared to $643 million, or 41 cents per share, in the year-ago quarter. On an adjusted basis, the company earned 51 cents per share in the latest quarter. Revenue climbed to $1.602 billion from $1.479 billion in the same quarter last year. Analysts, on average, expected the company to report earnings of 52 cents per share on revenue of $1.61 billion

At its last earnings call in November, Corning said that it anticipates worldwide glass market demand in fourth quarter could be flat to down slightly quarter to quarter. The company expects fourth-quarter Telecommunications segment sales to decline about 10%, consistent with historical fourth-quarter performance, while sales in Environmental Technologies are expected to be sequentially flat. Specialty Materials segment sales are expected to grow 10% to 20% in the quarter, primarily on continued strength in Corning Gorilla Glass sales. In Life Sciences, sales, excluding the impact of its recent acquisition, are expected to be down slightly, due to seasonal adjustments. 

Some are concerned that demand for LCD TVs in the U.S. has stalled, with market penetration of more than 80%. But others point out that demand for the product has continued to be strong in other parts of the world.

Last month, the company said that glass demand was stronger than expected and that sales of LCD TVs grew year-over-year in the United States in November, the first time in several months. Corning expects its gross margins to be 43 percent in the fourth quarter. Sales around the Black Friday period were in line with expectations. Attractive retail deals helped sales of LCD TVs increase in November in the United States, the first year-over-year improvement since April, the company said. Corning expects glass price declines in the first quarter to be more moderate than in the fourth quarter, "based on the recent strength in glass demand. The company will end the year with approximately $6 billion cash in hand and said this creates more room for acquisitions and to return cash to shareholders, it said in a statement. Corning said that it still expects its gross margins to be 43 percent in the fourth quarter, down from the third quarter because of seasonally low demand in the telecommunications sector and declines in glass prices.

Corning continues to expand rapidly throughout the tablet and mobile phone industry.The company's telecommunications division is poised to benefit from renewed telecom spending. Increasing traffic on smart devices, growth in cloud computing and enterprise investment in IT is expected to propel growth going forward. Corning’s Specialty Materials division has also been a source of sales growth lately due to strong demand for its Gorilla Glass. This glass is being used in more than 140 different products, mainly as a cover material for laptops and handheld devices, and the company expects to add another 90 products during the next six months bringing the total to more than 230. The popularity of this glass appears to be in its early stages. GLW has reported receiving requests from automakers, appliance designers and architectural industries, which could provide additional revenue opportunities in the future. The company projects sales of the glass to exit the year at a run rate of about $450 million attributable to use in handhelds and IT products. The glassmaker is planning to expand its production capacity at its facilities in Harrodsburg, Kentucky and in Asia as a response to rising demand. The company expects sales of scratch-resistant Gorilla Glass, a component in Samsung's GalaxyTab and Motorola's (NYSE: MOT) Droid phone, to reach $100 million in the fourth quarter and $250 million for the full year. Corning’s CFO Jim Flaws believes that Gorilla sales could reach $1 billion in 2011.

In terms of stock performance, Corning shares have gained nearly 4 percent since the beginning of the year.

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