Corning Earnings Preview: Display And Communications Sales Likely To Steer Growth
Corning (NYSE: GLW) is scheduled to report its Q1 earnings on April 25, and we expect double-digit growth in revenues for the quarter. Corning’s optical communication segment declined significantly in Q1’16 due to a software implementation issue which was resolved later in the year. As a result of this weak prior year comparable period, Corning is likely to see a nearly 30% increase in optical communication revenues. Additionally, the prices and demand for bigger LCD displays increased in the first quarter of 2017 which is likely to boost Corning’s sales. Corning’s specialty materials also have grown immensely in the last few months, primarily due to the adoption of its display products among Chinese smartphone makers. Lastly, environmental technology sales are expected to remain flat but may grow in the later half of 2017 due to recently won contracts with BMW and Mercedes-Benz.
Large Display and Optical Communications Likely To Witness Record Growth
Display technologies contributed nearly 35% to Corning’s overall revenues in 2016. Under this business, Corning produces large and small LCD displays for TV, desktop monitors, laptops and tablet PCs. The segment’s revenues increased by nearly 5% last year despite weaker demand from small screen LCD TVs and declining prices. Q1’17 display demand data reported by IHS Research suggest that, although the smaller display segment remained under pressure due to declining prices, large displays are growing fast. Suppliers are having difficulty fulfilling strong demand, and pricing is strong. Notebook PC and LCD monitor demand and prices remained stable in Q1’17. Thus, we expect Corning’s display sales to increase in the high single digits this quarter, which is also in line with Corning’s earning guidance for this quarter.
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Asian Smartphone Manufacturers May Boost Corning’s Specialty Material Sales
Corning’s specialty materials sales grew by nearly 20% in Q4’16 primarily due to its increasing presence in Chinese smartphones. Chinese smartphone makers are growing very rapidly, and most of their mid-range smartphones feature Corning’s Gorilla Glass. Corning’s relationships with smartphone makers in Asia have grown very fast, which is likely to help Corning’s specialty material sales growth in the coming years.
Corning’s environmental technology and life sciences businesses are expected to remain about flat this quarter due to declining freight rates and growing fleets. However, Corning’s new GPFs (Gas Particulate Filters) and other auto products are likely to gain strength in the second half of 2017 due to its new contract wins, which are likely to ramp up in the second half of 2017.
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