Corning’s Worth $17 On Improved Earnings Despite Industry Challenges

by Trefis Team
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Corning (NYSE:GLW) delivered earnings largely in line with our expectations. While both the company’s top and bottom lines have shown growth, it’s business environment continues to stay the same. The decline in glass prices due to oversupply in the market continues and is expected to persist for a few more quarters. The company’s Gorilla Glass is doing well and has now become an industry leading standard for the smartphone and tablet industry. Corning did well in its other business of Telecommunications, Environmental Technologies and Life Sciences, thus driving hopes of revenue streams which can offset weakness in its core business.

Corning principally competes with other glass manufacturers like Furukawa Electric (FUWAY:PK) and Sumitomo Electric Industries (SMTOY.PK). We currently have a $17 price estimate for Trefis, which is about 21% above the market price.

See our full analysis of the Corning stock here

LCD prices continue weakness

The sales of Corning’s display business fell down by 11% year on year and 10% sequentially as the company’s lowered capacity to deal with declining glass prices did not yield significant results. The company currently carries 15 weeks of inventory and has indicated a better supply/demand which is consistent with its efforts to build up robust inventory levels. Corning saw better glass sales volumes which were up by mid-single digits. Its joint venture Samsung Corning Precision continued to struggle and saw decline in both sales volumes and prices. The volumes though declined by less than 10%, which is an improvement on the previous quarters.

Specialty segment continues to do well

Corning’s Gorilla Glass and its improved version, Gorilla Glass II continue to do extremely well in the market. They are now being used in 33 major brands and 700 products, such as smartphones and tablet computers around the world. The explosive growth of the tablet and smartphone industry has augured particularly well for Corning on this front. Industry experts are speculating about the possibility of new versions of iPhone and Samsung Galaxy, the two largest selling smart phones using Gorilla Glass II for their touch screens. The sales of Corning’s specialty segment was up by 13% year on year and 21% sequentially.

Telecommunications and Environment segments can be the emerging stars

Corning’s telecommunications division recorded a sales growth of 7% year on year and 4% sequentially on the back of brisk growth in the hardware equipment section. The company was able to capitalize on a strong worldwide demand for fiber-to-the-home products, enterprise network solutions and fiber and cable products.The environmental sales were up 2% year on year and 12% sequentially due to consistent double digit sequential growth in both diesel and auto sales. These two businesses represent two exciting market growth opportunities for Corning as it beefs up its portfolio with new more innovative products. We expect the growth trend in these segments to continue for the coming quarters.

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