Tuesday, July 26, 2011

Corning Inc. (NYSE: GLW): Q2 Earnings Preview 2011

Corning Inc. (NYSE: GLW), the world's largest manufacturer of liquid crystal displays, is scheduled to release second-quarter earnings before the opening bell on Wednesday, July 26, 2011. Analysts, on average, expect the company to report earnings of 47 cents per share on revenue of $1.96 billion. In the year-ago period, the company reported earnings of 58 cents per share on revenue of $1.71 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 first quarter, the Corning, New York-based company's net income was $748 million, or 47 cents a share, compared to $816 million, or 52 cents, in the year-ago quarter. Revenue rose 24% to $1.92 billion. Analysts, on average, expected the company to report earnings of 44 cents on revenue of $1.87 billion.

Corning stated that the crisis in Japan did not affect its operations or supply chain in the last quarter and those suppliers that had been affected had made arrangements for second sourcing. Second quarter results will however be impacted by an inventory correction at Sharp, which intends to lower utilization rates for the purpose. Corning currently does not expect the inventory correction to continue into the third quarter.

At its last earnings call in April, CFO James Flaws said, "There are several key market trends that seem to be playing to Corning's strengths as we look to the future. These trends provide us with great opportunities across all our major businesses and position Corning to grow sales to more than $10 billion by 2014."  The company said that it expects combined glass volume in the second quarter to be consistent with the first quarter, with glass price declines expected to moderate further. For the second quarter, telecommunications segment sales are expected to increase around 20 percent sequentially and nearly 30 percent year-over-year. Environmental Technologies segment sales could decline slightly sequentially, but increase about 35 percent year-over-year. Specialty Materials is expected to grow sales by about 20 percent due to the continued strong Gorilla Glass performance. Meanwhile, Corning anticipates equity earnings to be up about 10 percent sequentially. The gross margin is expected to be down slightly, due to lower glass volumes.

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.

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 a number of products, mainly as a cover material for laptops and handheld devices. GLW has reported receiving requests from automakers, appliance designers and architectural industries, which could provide additional revenue opportunities in the future. Corning’s CFO Jim Flaws believes that Gorilla sales could reach $1 billion this year.

In April, Chairman and Chief Executive Wendell Weeks issued a bullish outlook for the liquid-crystal display maker, saying that the company has potential to grow to $10 billion in sales by 2014.

Full Disclosure: None.
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