Can Optical Communications And Environmental Technologies Drive Growth For Corning In Q2?

by Trefis Team
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Corning (NASDAQ: GLW) is scheduled to publish its Q2 2018 results on July 25. The company has reported strong revenue growth from the Optical Communications and Environmental Technologies segments in recent years. This trend continued in the first quarter of 2018, with net revenues growing at 4% year-on-year to $2.5 billion. Optical Communications segment revenue was up 8% year-on-year to just under $890 million, while Environmental Technologies segment revenue grew 17% year-on-year to $322 million. Increased consumption of streaming services, robust growth of the U.S. auto market, and improvement of the heavy-duty truck market in North America should drive Q2 results. Below, we take a look at what to expect when the company reports earnings.

We have a price a $31 price estimate for Corning, which is higher than the current market price. The charts have been made using our new, interactive platform. You can click here to modify the different driver assumptions, and gauge their impact on the earnings and price per share metrics.

Factors That May Impact Future Performance

The Optical Communications segment enjoyed a strong Q1, as margins improved as a result of increased demand for Corning products by data center and carrier businesses. This was largely driven by increased consumption of streaming and cloud services. Corning is one of the leading players in the Optical Communications segment, and is well-positioned to increase its share over time. The Optical Communications segment holds substantial growth potential for Corning as a result of robust growth in the amount of data being transmitted and processed.

The Environmental Technologies segment saw robust growth in Q1, as a result of increased demand for their gas particulate filters (GPF’s). This was largely driven by the continued robustness of the auto market in the U.S. and improvement of the heavy-duty truck market in North America. As a result, we expect strong demand for Corning’s gas particulate filters (GPF’s) as auto OEMs ramp up for full adoption of EURO VI emission standards and as governments look to tighten emission standards. This should drive its Environmental Technologies segment.

On the other hand, we expect the Specialty Materials segment to see continued pressure in Q2 as a result of fewer new smartphone launches and soft demand for new smartphones. However, the launch of Gorilla Glass 6, coupled with the anticipated launch of several new smartphones later this year, should provide for significant growth opportunities in the second half of 2018. Further, we also expect soft demand for its display technology segment to continue, driven by sequential LCD price declines.

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