Corning (NYSE:GLW) has released its second quarter earnings. The company has posted net sales of $1.9 billion in the second quarter, down 5%, compared to the year-ago period.  Net income also declined by 39% on a year-over-year basis. The decline is primarily a result of continuing decline in prices of LCD glass as indicated in a previous article. However, the company has continued to post growth in its optical fibers and cable business, and in sales of Gorilla Glass.
Continuing decline in price of LCD glass
The prices of LCD glass substrates have been declining since the last quarter of 2011, due to overcapacity in the market and reduction in the amount of inventory in supply chain. As a result, sales in the Display Technologies division that primarily manufactures LCD glass substrates declined 16% in the second quarter, on a year-over-year basis.
However, the price decline has been less severe in the second quarter as compared to the previous two quarters, and we anticipate it to be moderate over remainder of 2012.
European slowdown impacted sales
Also, sales of light-duty filters or auto emission systems manufactured by the company declined in Europe, due to continuing economic slowdown there. This resulted in a 3% year-over-year decline in sales at Environment Technologies division of the company.
Higher sales of optical fibers and cables in China
However, higher sales of optical fibers and cables in China and North America resulted in 2% year-over-year increase in sales at Telecommunications division in the second quarter, compared to the year-ago quarter. The low optical fiber network capacities in developing countries has been driving growth in the division, and we anticipate the trend to continue over the next few years as well.
Higher sales of Gorilla Glass
Also, higher sales of Gorilla Glass has contributed to 5% year-over-year growth in Specialty Materials division’s sales. The glass continues to dominate the display surface market in handheld display devices including, smart phones and tablets.
On the whole, Corning posted weak results in second quarter earnings on account of continuing weakness in LCD glass prices and European economic slowdown, offset by higher sales of optical fibers and Gorilla Glass. However, moderation in decline of LCD prices bodes well for the company, and we could expect better results over the coming quarters.
We currently have a stock price estimate of $16 for the company, significantly above its current market price. We are in the process of incorporating the second quarter results and will update our analysis shortly.Notes: