What To Expect From Corning In Q4

by Trefis Team
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Corning (NASDAQ: GLW) has had a solid year so far. With three quarters reported, the company’s revenue growth year to date has been nearly 10%, and we expect this trend to continue when it reports fourth quarter earnings on January 29. We expect this growth to be primarily driven by revenues from the Optical Communications segment. This revenue stream has continued its solid performance throughout the year, mainly due to improved demand for its Carrier and Enterprise Network products, coupled with the acquisition of 3M’s Communication Markets division, and we expect these tailwinds to continue into Q4. Further, robust demand for its gas particulate filters (GPFs), coupled with the Changan Automobile partnership and full adoption of new emission standards – EURO VI and China 6 – should drive solid growth for its Environmental Technologies segment. In addition, multiple new smartphone launches in Q4, coupled with increased use of Gorilla Glass DX+ for smartwatches and decent demand for its advanced optics products, should drive Corning’s Q4 results. Below we take a look at what to expect when the company reports earnings on Tuesday.

Our price estimate for Corning’s stock stands at $33, which is higher than the current market price. We have also created an interactive dashboard which outlines what to expect from Corning’s full-year results. You can modify the key value drivers to see how they would impact the company’s revenues and bottom line. Below we discuss some of the key factors that are likely to impact the company’s earnings.

The Optical Communications division, which accounts for lion’s share of Corning’s overall revenue, holds significant growth potential for the company. This segment saw robust growth in the first nine months of 2018, mainly due to improved demand for its products across North America and Europe – as a result of solid growth in the amount of data being transferred and processed. Therefore, we expect data center and carrier businesses to drive this increased demand for its products in the near term. Corning is one of the major players in this segment, and is well-positioned to expand its share over time. Additionally, the acquisition of 3M’s Communication Markets Division should not only increase both its global reach and portfolio, but also provide for moderate growth opportunities in the upcoming quarters and meaningful long-term growth opportunities.

The Environmental Technology segment enjoyed strong growth in the first nine months of 2018, as a result of improved demand for its gas particulate filters (GPFs). This was largely due to sustained strength in the auto market in the U.S. and improvement of the heavy-duty truck market in North America as well as Europe. As governments look to tighten emission standards, we expect solid demand for its gas particulate filters (GPFs) as auto OEMs ramp up for full adoption of EURO VI emission standards. Additionally, we believe the Hefei facility capacity expansion should help Corning meet the expected increase in demand for its gas particulate filters as a result of the upcoming China 6 automotive emission standards. Further, we expect increased demand for its GPFs as a result of its recent alliance with Changan Automobile. This should provide a significant medium term opportunity for the Environmental Technologies segment.

Corning’s Specialty Materials division had a decent first nine months of 2018, largely driven by better than expected shipments of Gorilla Glass due to several new smartphone launches in Q3. Further, the company also witnessed reasonable demand for its advanced optics products. Additionally, its strategic partnerships with smartphone manufacturer OPPO, as well as the launch of several new smartphones in 2019, should result in strong demand for Corning’s recently launched Gorilla Glass 6. In addition, its long-term supply partnership with WaveOptics – a leading manufacturer of diffractive waveguides for use in augmented reality (AR) wearables – should result in continued demand for its refractive index optics. Moreover, Samsung’s decision to use Gorilla Glass DX+ for its smartwatch should provide a moderate boost in the near term. We expect this segment to grow further, driven by new smartphone launches, which should aid robust demand for its Gorilla Glass thanks to increased adoption by smartphone OEMs.

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