Corning Earnings Preview: Growth Momentum To Continue
Corning (NYSE: GLW) is scheduled to report its Q2’17 earnings on July 26, and we expect high single digit growth in its overall revenues for the quarter. Corning’s Optical Communication sales have been increasing for the past year due to increased demand for fiber optic products. We also expect the company to benefit from its acquisition of Alliance Fiber Optic Products in addition to the increased demand of optical communication products. Corning’s Specialty Materials business has also grown immensely in the last few months, primarily due to the adoption of its display products among Chinese smartphone makers and the launch of Samsung Galaxy S8. We also believe that Corning’s auto products and GPF filters are likely to aid its growth this quarter.
Growth Momentum To Continue
Corning’s Optical Communication sales have been increasing for the past 4 quarters after the software implementation issue was resolved in Q2’16. Growth in internet and broadband penetration in developing economies, increased video content, and new optical applications are largely driving the strong demand for Corning’s optical communication products in the last few years. We expect this trend to continue in Q2’17 as well.
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Display Technology, on the other hand, is the company’s largest segment in terms of sales and profits. Corning has market leadership in the large display market, and its margins are far higher than those of its competitors. LCD prices have been declining for about 2 years now due to a supply-demand imbalance. However, the decline has moderated in the last few quarters as Corning’s competitors’ low margins provide somewhat of a floor from a pricing standpoint. And while prices have declined, LCD shipments are growing at a decent pace. Thus, we expect Corning’s sales to continue to increase this quarter, but there will be some margin pressure.
Gorilla Glass, Auto Products To Be Among Growth Drivers
The rapid adoption of Corning’s Gorilla Glass by Asian smartphone makers such as OPPO, Micromax, and Xiaomi have resulted in strong growth over the past year. The launch of Samsung’s Galaxy Note 8 is likely to further boost Corning’s Specialty Materials sales growth. Additionally, Corning has started to manufacture its own screen protectors and back cover to maximize its revenue per device.
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