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Corning (GLW) Beats on Q1 Earnings & Revenue Estimates
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Corning Inc. (GLW - Free Report) reported first-quarter 2017 adjusted earnings of 39 cents per share, beating the Zacks Consensus Estimate by 4 cents (11.4%). Earnings surged 39.3% on a year-over-year basis but declined 22% sequentially in the reported quarter.
The year-over-year growth was driven by improvement in revenues. Adjusted revenues increased 14.5% year over year to $2.49 billion, which comfortably surpassed the Zacks Consensus Estimate of $2.36 billion. However, revenues declined 2.6% on a sequential basis.
We believe that the beat reflects strength in the company’s Optical Communications and Specialty Materials business lines. Moreover, Corning’s Strategy and Capital Allocation Framework continues to boost shareholder value. The company returned $552 million to shareholders through a combination of dividends and share buyback in the reported quarter.
Corning Incorporated Price, Consensus and EPS Surprise
We believe that these factors will help the stock to continue outperforming the broader market in the rest of 2017. We note that Corning has outperformed the Zacks Communications Components industry on a year-to-date basis. While the industry gained 8.8%, the stock witnessed an increase of 13.4%.
Segment Details
The Display Technologies segment generated around 35.6% of total revenue. On an adjusted basis, revenues increased 2.1% from the year-ago quarter but declined 6.4% sequentially to $846 million.
The LCD glass market and Corning’s volume were up by a mid-teen percentage on a year- over-year basis. The company noted that sequential glass price declines were moderate, equalling the best first-quarter declines in the past six years.
Optical Communications generated almost 34.4% of total revenue, much better than management’s anticipated increase of at least 25%. Reported segment revenues grew 34.3% year over year and was almost flat on a sequential basis to $818 million on the back of strong demand for fiber-to-the-home market solutions in North America.
We note that the recently announced deal with Verizon (VZ - Free Report) reflects this strength, as U.S.-based service providers overhaul networks to improve 4G coverage and speed-up 5G deployments.
The Environmental Technologies segment generated around 11.6% of revenues. Reported segment revenues were up 4.2% year over year and 12.2% sequentially to $275 million.
Specialty Materials generated 12.6% of revenues. Reported segment revenues surged 32.2% year over year but declined 10.7% sequentially to $300 million backed by continuing strong adoption of Gorilla Glass 5.
The Life Sciences business accounted for around 8.8% of revenues. Reported revenues were up 2.9% from the year-ago quarter and 1.9% sequentially to $210 million.
Operating Details
Adjusted gross margin expanded 150 basis points (bps) from the year-ago quarter but contracted 60 bps from the previous quarter to 42.3%.
Adjusted selling, general & administrative expense (SG&A) as percentage of revenues decreased 90 bps from the year-ago quarter and 40 bps from the previous quarter to 13.4%.
Moreover, research & development expense (R&D) as percentage of revenues declined 90 bps on a year-over-year basis but increased 140 bps sequentially.
Operating margin (excluding amortization of purchased intangibles and restructuring, impairment & other charges) expanded 310 bps on a year-over-year basis and 150 bps from the previous quarter to 20.8%.
Guidance
Management expects revenues and earnings per share (EPS) to grow on a year-over-year basis in second-quarter 2017. Currently, the Zacks Consensus Estimate for revenues and EPS are pegged at $2.49 billion and 41 cents, respectively.
Corning expects glass volume to increase by mid-single digit percentage on a year-over-year basis and low-single digit percentage sequentially. The company expects sequential LCD glass price declines to be substantially less than first-quarter 2017.
Optical Communications sales are anticipated to increase 10% from the year-ago quarter in the second quarter.
Environmental Technologies sales are expected to be in line with the year-ago quarter, while Specialty Materials sales are anticipated to increase by a high-teen percentage range. The Life Sciences business will grow low-single digit percentage from the year-ago quarter.
For full-year 2017, Corning still expects mid-single digit percentage growth in glass volume, in line with the overall LCD glass market. Price is now anticipated to decline approximately 10% or possibly a lower rate.
Applied Optoelectronics and UTStarcom are expected to report earnings on May 4 and May 12, respectively.
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Corning (GLW) Beats on Q1 Earnings & Revenue Estimates
Corning Inc. (GLW - Free Report) reported first-quarter 2017 adjusted earnings of 39 cents per share, beating the Zacks Consensus Estimate by 4 cents (11.4%). Earnings surged 39.3% on a year-over-year basis but declined 22% sequentially in the reported quarter.
The year-over-year growth was driven by improvement in revenues. Adjusted revenues increased 14.5% year over year to $2.49 billion, which comfortably surpassed the Zacks Consensus Estimate of $2.36 billion. However, revenues declined 2.6% on a sequential basis.
We believe that the beat reflects strength in the company’s Optical Communications and Specialty Materials business lines. Moreover, Corning’s Strategy and Capital Allocation Framework continues to boost shareholder value. The company returned $552 million to shareholders through a combination of dividends and share buyback in the reported quarter.
Corning Incorporated Price, Consensus and EPS Surprise
Corning Incorporated Price, Consensus and EPS Surprise | Corning Incorporated Quote
We believe that these factors will help the stock to continue outperforming the broader market in the rest of 2017. We note that Corning has outperformed the Zacks Communications Components industry on a year-to-date basis. While the industry gained 8.8%, the stock witnessed an increase of 13.4%.
Segment Details
The Display Technologies segment generated around 35.6% of total revenue. On an adjusted basis, revenues increased 2.1% from the year-ago quarter but declined 6.4% sequentially to $846 million.
The LCD glass market and Corning’s volume were up by a mid-teen percentage on a year- over-year basis. The company noted that sequential glass price declines were moderate, equalling the best first-quarter declines in the past six years.
Optical Communications generated almost 34.4% of total revenue, much better than management’s anticipated increase of at least 25%. Reported segment revenues grew 34.3% year over year and was almost flat on a sequential basis to $818 million on the back of strong demand for fiber-to-the-home market solutions in North America.
We note that the recently announced deal with Verizon (VZ - Free Report) reflects this strength, as U.S.-based service providers overhaul networks to improve 4G coverage and speed-up 5G deployments.
The Environmental Technologies segment generated around 11.6% of revenues. Reported segment revenues were up 4.2% year over year and 12.2% sequentially to $275 million.
Specialty Materials generated 12.6% of revenues. Reported segment revenues surged 32.2% year over year but declined 10.7% sequentially to $300 million backed by continuing strong adoption of Gorilla Glass 5.
The Life Sciences business accounted for around 8.8% of revenues. Reported revenues were up 2.9% from the year-ago quarter and 1.9% sequentially to $210 million.
Operating Details
Adjusted gross margin expanded 150 basis points (bps) from the year-ago quarter but contracted 60 bps from the previous quarter to 42.3%.
Adjusted selling, general & administrative expense (SG&A) as percentage of revenues decreased 90 bps from the year-ago quarter and 40 bps from the previous quarter to 13.4%.
Moreover, research & development expense (R&D) as percentage of revenues declined 90 bps on a year-over-year basis but increased 140 bps sequentially.
Operating margin (excluding amortization of purchased intangibles and restructuring, impairment & other charges) expanded 310 bps on a year-over-year basis and 150 bps from the previous quarter to 20.8%.
Guidance
Management expects revenues and earnings per share (EPS) to grow on a year-over-year basis in second-quarter 2017. Currently, the Zacks Consensus Estimate for revenues and EPS are pegged at $2.49 billion and 41 cents, respectively.
Corning expects glass volume to increase by mid-single digit percentage on a year-over-year basis and low-single digit percentage sequentially. The company expects sequential LCD glass price declines to be substantially less than first-quarter 2017.
Optical Communications sales are anticipated to increase 10% from the year-ago quarter in the second quarter.
Environmental Technologies sales are expected to be in line with the year-ago quarter, while Specialty Materials sales are anticipated to increase by a high-teen percentage range. The Life Sciences business will grow low-single digit percentage from the year-ago quarter.
For full-year 2017, Corning still expects mid-single digit percentage growth in glass volume, in line with the overall LCD glass market. Price is now anticipated to decline approximately 10% or possibly a lower rate.
Zacks Rank & Other Key Picks
Corning currently carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the broader technology sector are Applied Optoelectronics (AAOI - Free Report) and UTStarcom (UTSI - Free Report) . Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Applied Optoelectronics and UTStarcom are expected to report earnings on May 4 and May 12, respectively.
Zacks’ Best Private Investment Ideas
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors.
Click here for Zacks' private trades >>