Optical Communication Segment Should Help Corning’s Revenue Cross $12 Billion This Year

Corning Incorporated’s (NYSE:GLW) total revenue for 2018 grew 11.6% year-over-year to $11.3 billion driven by sales growth across its business lines, led by impressive growth for its Optical Communications business – its largest operating segment. Trefis highlights the trends in Corning’s Revenues over recent years in an interactive dashboard along with our forecast for fiscal 2019. We expect Corning’s total revenue to increase by 7.5% to $12.1 billion in FY 2019, primarily driven by growth in the Optical Communication Segment, which in turn is expected to grow by 9.5% to $4.6 billion. We estimate Corning’s valuation to be $35 per share, which is around 25% ahead of the current market level.

You can understand the revenue trends and division-wise revenue performance, and alter the assumptions to arrive at your own estimate for Corning’s revenues in the dashboard. Additionally, you can find more Trefis Industrials Data here.

A Quick Look At Corning’s Revenues

Corning primarily has six revenue sources:

• Optical Communication: Optical Communication segment is classified into two main product groupings – carrier network and enterprise network. The carrier network group consists primarily of products and solutions for optical-based communications infrastructure while the Enterprise network group consists primarily of optical-based communication networks
• Display Technologies: Under this segment Corning manufactures glass substrates for high performance displays, including organic light-emitting diode (OLEDs) and liquid crystal displays (LCDs).
• Specialty Materials: This segment manufactures products that provide more than 150 material formulations for glass, glass ceramics and fluoride crystals.
• Environmental Technologies: This segment manufactures ceramic substrates and filter products for emissions control in mobile applications around the world
• Life Sciences: Life Sciences segment works with researchers and drug manufacturers seeking to increase efficiencies, reduce costs and compress timelines
• Other: This segment is primarily comprised of the results of the pharmaceutical technologies business and new product lines and development projects, as well as certain corporate investments.

Who Are Corning’s Clients?

• Corning is primarily responsible for supporting customers using optical communications, mobile consumer electronics, display technology, automotive emissions control products, and life sciences vessels.
• However, Corning’s business model faces stiff challenges and competition from offerings by its global competitors such as 3M, Johnson Control.

How Has Corning’s Revenue Trended Historically?

• Corning has added more than $2.1 billion to total revenue since 2015 at an average annual rate of 7.4% led by steady growth across all operating segments.
• Display technologies and optical communications segments have contributed more than two-third of the company’s revenue over the last four years.
• We expect Corning’s revenues to increase by 7.5% and reach around $12.1 billion in FY 2019

A Detailed Look At Corning’s segment performance and revenue change over the years:

Optical Communication Is Corning’s Fastest-Growing Division

• Optical communication has been the company’s fastest-growing segment – contributing more than 50% of the company’s revenue growth in the last four years.
• This segment has added more than $1.2 billion to total revenues at an average annual rate of 12%.
• Sales growth in this segment has been driven by multiyear data center and carrier projects as well as sales from the recently acquired 3M’s Communications
• We expect this segment to continue its growth trajectory, with revenues increasing at a rate of 12% to $4.6 billion in FY 2019.
• Moreover, strong demand for the company’s fiber, cable and connectivity solutions should help this segment’s revenue cross $5 billion by 2020.

Display Technologies Rebounds After Struggling Over 2015-2017

• Display Technologies has added less than $100 million to total revenues in the last four years. Price decline in the display technology markets had negatively impacted the segment’s performance over 2015-2017.
• However, pricing environment improved in 2018 and this segment grew at 5.7%, adding more than $170 million to total revenues.
• The segment’s share has declined from above 35% in 2016 to nearly 28% in 2018 due to faster growth in the Optical Communications segment.
• Favorable pricing environment and continuous growth of the display glass market should help this segment to achieve steady growth and record $3.3 billion in revenues in FY 2019

Data about how revenues for Corning’s Environment Technologies, Specialty Materials, Life Sciences and Other Segment have changed over recent years is available in our interactive dashboard for the company.

We forecast Corning’s adjusted EPS for full-year 2019 to be around $2.02. Using this figure with our estimated forward P/E ratio of 17x, this works out to a price estimate of $35 for Corning’s stock, which is around 25% ahead of the current market price.

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