Corning’s Earnings: Gorilla Glass Growth Will Offset LCD Price Weakness

by Trefis Team
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    Quick Take 

  • Corning’s Gorilla Glass will continue to post growth in Q1 given the growing adoption of touch-enabled consumer electronic devices like smartphones and tablets.
  • Sales of Corning’s optical fibers and cables are also expected to grow on demand from the emerging economies and the FTTP (fiber-to-the-premises) project of the Australian government.
  • However, LCD price declines, which are expected to be more moderate in 2013 compared to 2012, will partially offset the growth from Gorilla Glass and optical fibers.

Corning (NYSE:GLW) will announce its first quarter earnings Wednesday, April 24. The diversified industrial company will likely post results that show continued stabilization in its LCD display business and growth in its new products, particularly Gorilla Glass. We also anticipate Corning’s equity earnings from Dow Corning will continue to decline due to weak demand for polycrystalline silicon from the solar industry. [See Overcapacity In The Solar Industry Is Weighing On Corning]

We currently have a stock price estimate of $14 for Corning, approximately 5% above its current market price.

See our complete analysis of Corning here

Gorilla Glass And Optical Fibers

Corning’s market leading cover glass for smartphones, tablets and touch-enabled notebooks crossed $1 billion in sales in 2012. This glass called Gorilla Glass, which was launched in 2007, has been the fastest growing and one of the most profitable businesses of Corning. In 2013, we anticipate sales of Gorilla Glass to continue to grow at a strong rate driven by the rising unit sales of touch-enabled mobile devices and their increasing screen sizes as well as the emerging trend of touch on notebooks.

Over the long term, Corning forecast that sales of Gorilla Glass can double on growth in its market size, which is being driven by the above mentioned trends. Gorilla Glass is part of the Specialty Materials segment of Corning, which constitutes nearly 23% of its total value, according to our estimates.

Apart from the sales growth of Gorilla Glass, we anticipate sales at Corning’s Telecommunication segment to also increase in the first quarter on demand from the emerging economies and the ongoing fiber-to-the-home broadband connectivity project in Australia. Corning’s Telecommunication segment manufactures optical fibers, cables and other telecom hardwares. The company is also currently acquiring the Brazil-based telecom connectivity solutions provider, Bargoa S.A., to occupy a larger share in the fast-growing telecom industry of Brazil. Overall, in the long term, we anticipate sales at Corning’s Telecommunication segment to grow at a strong rate driven by the rising broadband penetration in developing countries. [See Corning Dials Up Growth With Rising Broadband Demand]

LCD Price Decline Will Partially Offset Growth

The growth from Gorilla Glass and optical fibers will likely be partially offset from price declines in the LCD glass business of Corning. In 2012, profits from Corning’s wholly owned LCD glass business, called Display Technologies, and its equity earnings from Samsung Corning Precision, which also manufactures LCD glass, had declined significantly due to severe LCD price decline. In 2013, we anticipate the price decline in LCD glass to be more moderate as a significant portion of the industry’s manufacturing overcapacity has been addressed through higher demand and slower capacity addition.

Corning on its part, anticipates that it will balance these moderate price decline in 2013, with cost reduction and increased productivity. Growth in the LCD market size will also help it counter the negative impact from LCD price decline. The company currently anticipates the global LCD glass retail market to grow in mid-to-high single-digit percentage in 2013, from 3.5 billion square feet in 2012. [1]

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Notes:
  1. Corning’s 2012 10-K, February 13 2013, www.corning.com []
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