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Corning Raises LCD Sales Estimate

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Corning Inc. (GLW - Analyst Report) raised its LCD glass volume outlook for the fourth quarter of 2012. Following the news, the company’s shares jumped 6.87% to $12.13.

The company now expects glass market volume to increase in the mid single digits percentage range from the previous quarter, in contrast to its earlier view of a low-to-mid single digits decline. Total LCD glass volume at both its wholly-owned business and Samsung Corning Precision Materials Co. (SCP) is also expected to be up mid-single digits. However, LCD glass prices are still expected to decline sequentially in the fourth quarter due to the company’s new agreements with customers.

Management also stated that Gorilla Glass sales could reach $1 billion by the end of this year. Specialty Materials segment sales are expected to increase 5% sequentially and 60% year over year, driven by strong demand for Gorilla Glass. Life Sciences sales are expected to jump more than 15% sequentially versus the previous guidance of a 5% decline due to the completion of the Discovery Labware acquisition during the quarter.

However, equity earnings from Dow Corning are expected to decline 20% sequentially as opposed to a 25% increase guided originally due to weak demand for solar-grade polysilicon.

Corning makes Gorilla Glass for LCD TVs, smartphones and tablet computers. Management believes that robust U.S. consumer demand for big-screen televisions and introduction of various new consumer electronics products will boost Gorilla Glass sales going forward. Additionally, management stated that the demand for LCD televisions in North America is turning out to be better than expected.

Moreover, Google's new Nexus 4 smartphone and Nexus 10 tablet, both feature Corning's Gorilla Glass 2. With strong sales of Nexus 4 on Google Play, we expect the demand for Corning's glass substrates to further increase in the near future. Also, devices from Apple Inc. (AAPL - Analyst Report) and Samsung Electronics Co., which use Corning’s glass, are witnessing higher demand from the Chinese market ahead of their New Year holiday season.

We believe Corning’s improved Glass outlook clearly indicates higher global demand for cover glass used in tablet computers and LCD TVs. However, the downward pressure on glass prices is expected to continue, which might impact results in the fourth quarter and beyond.

Corning is primarily a developer of advanced glass substrates for multiple markets. The company’s third quarter earnings beat the Zacks Consensus Estimate by 2 cents, or 7.1%. Revenues of $2.04 billion were up 6.8% sequentially but down 1.8% from the year-ago quarter.

The company’s Senior Vice President and Corporate Controller Tony Tripeny stated that the strength in LCD glass sales and continued strong demand for Gorilla Glass would likely drive earnings growth in the coming quarters.

However, excess capacity in the market place, price pressure and competition remain challenges for Corning’s glass business.

Currently, Corning has a Zacks #3 Rank, which implies a Hold rating on a short-term basis.

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