Corning‘s (NYSE:GLW) profits rose by 35% annually to $638 million in the second quarter driven by higher LCD shipment volumes and improved manufacturing performance, partially offset by LCD price declines.  With these results, the company posted its third consecutive quarter of earnings growth after incurring severe losses from LCD price declines in 2011 and through the third quarter of 2012.
We currently have a stock price estimate of $15.50 for Corning, approximately in line with its current market price.
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LCD Glass Business Stabilizes
In the second quarter, Corning faced more moderate LCD price declines from the first quarter as major portions of industry’s manufacturing overcapacity was addressed through higher demand and slower capacity addition. The company faced LCD price declines in the range of 2%-3% in the second quarter compared to the first quarter.   However, this was more than offset by mid-single-digit sequential growth in its LCD shipment volumes driven by rising demand for televisions, notebooks, tablets and smartphones coupled with their growing screen sizes. As a result, Corning’s core sales from its display technologies segments rose by 21% annually to $670 million in the second quarter. 
It is crucial to note here that last quarter onward, Corning started reporting core operating results, which exclude the impact from yen currency translation. The company has done so in order to weigh out the impact from yen-dollar currency fluctuation and provide for clearer comparison between periods.
Looking ahead, Corning anticipates that its LCD business will stabilize in the third quarter with price declines in the range seen in the second quarter. The company also expects its third quarter LCD glass shipment volumes to be consistent or up slightly from the second quarter driven by rising television demand for 50 inch or larger models. This stabilization in Corning’s LCD glass business will go a long way in shoring up its results as this segment constitutes the largest portion of its value among other segments.
Gorilla Glass Continues To Aid Growth
Separately, Corning’s growth from its LCD glass business in the second quarter was enhanced by bottom line improvements driven by cost reductions and improved manufacturing performance, especially at Gorilla Glass where core earnings rose by 33% from last year and telecommunications segment – which manufactures optical fibers and cables – and where core earnings rose by around 62% annually.  Growth at the telecommunications segment was also driven by increased sales from Australia’s national broadband build out, which aims to take broadband Internet connection to more than 90% of all Australian homes.
In the current quarter, the company anticipates continued earnings growth from Gorilla Glass driven by the emerging trend of touch on notebooks. Corning also anticipates sales from its remaining segments – telecommunications, environmental technologies and life sciences – to grow in the third quarter.Notes: