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Why Is Corning (GLW) Down 0.1% Since Last Earnings Report?

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A month has gone by since the last earnings report for Corning (GLW - Free Report) . Shares have lost about 0.1% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Corning due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Corning Surpasses Earnings & Revenue Estimates in Q4

Corning reported impressive fourth-quarter 2021 results, wherein both the bottom and the top lines beat the Zacks Consensus Estimate.

Net Income

On a GAAP basis, net income in the quarter was $487 million or 56 cents per share compared with $252 million or 28 cents per share in the prior-year quarter. Core net income increased to $465 million or 54 cents per share from $462 million or 52 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 3 cents. In 2021, GAAP net income was $1,906 million or $1.28 per share compared with $512 million or 54 cents per share in 2020.

Revenues

Quarterly GAAP net sales increased 9.7% year over year to $3,676 million, driven by growth in Optical Communications, Display Technologies and Life Sciences. Core sales grew to $3,714 million from $3,328 million. The top line beat the consensus estimate of $3,610 million. In 2021, GAAP net sales increased 24.6% year over year to $14,082 million, led by Optical Communications, Display Technologies, Life Sciences and Hemlock Semiconductor Group.

Quarterly Segment Results

Net sales in Optical Communications increased 23.6% year over year to $1,206 million. 5G, broadband and cloud computing continued to drive growth. The segment’s net income was $155 million compared with $141 million in the prior-year quarter. Increased raw material and shipping costs significantly affected profitability.

Net sales in Display Technologies were $942 million compared with $841 million in the prior-year quarter, thanks to the favorable glass pricing environment. Gen 10.5 capacity ramps contributed to strong volume growth that outpaced the glass market. The segment’s net income was $252 million compared with $217 million in the year-ago quarter.

Specialty Materials’ net sales were down 5% year over year to $518 million on typical seasonality. However, the company is witnessing strong sales of premium cover materials. The segment’s net income was $92 million compared with $136 million a year ago. The decline was due to increased investments in innovation programs that are moving toward commercialization.

Environmental Technologies’ net sales declined 20.7% year over year to $353 million as a result of lower production levels in the automotive industry due to the semiconductor chip shortage. The segment’s net income was $54 million compared with $93 million in the year-ago quarter.

Net sales in Life Sciences were up 15.7% year over year to $317 million. The rise was driven by the increased demand to support the global pandemic response, recovery in research labs and strong demand for bioproduction vessels and diagnostic-related consumables. The segment’s net income improved to $49 million from $42 million a year ago.

In All Other, net sales increased 53% year over year to $378 million. This was driven by strong performance in Hemlock Semiconductor Group, which Corning consolidated in September 2020. Hemlock witnessed strong demand for semiconductor products, along with demand for solar-grade polysilicon. Automotive Glass Solutions and Corning Pharmaceutical Technologies also contributed to growth. The segment’s net loss was $7 million compared with a net loss of $29 million a year ago.

Other Quarterly Details

Cost of sales increased 12.5% year over year to $2,405 million. Gross profit improved to $1,271 million from $1,213 million. Core gross profit was $1,355 million compared with $1,283 million in the prior-year quarter, with respective margins of 36.5% and 38.6%. Operating income was $483 million compared with $476 million a year ago.

Cash Flow & Liquidity

In 2021, Corning generated $3,412 million of cash from operating activities compared with $2,180 million in 2020. Free cash flow increased to $1,765 million from $948 million. As of Dec 31, 2021, the company had $2,148 million in cash and cash equivalents with $6,989 million of long-term debt.

Outlook

Despite supply chain challenges and inflationary headwinds, Corning remains focused on driving top-line growth and expanding its margins. The company is well-positioned to address the growing customer demand, broaden its portfolio and enhance shareholders’ value. Corning expects about $15 billion in 2022 sales and higher profitability as negotiated price increases in long-term contracts take effect throughout the year. For the ongoing quarter, it expects core sales in the range of $3.5 billion to $3.7 billion. Core EPS is estimated between 48 cents and 53 cents. The company is focused on expanding gross margin and expects an improvement in 2022 as sales grow and price actions take hold.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

Currently, Corning has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Corning has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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