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Corning (GLW) to Post Q4 Earnings: What's in the Offing?

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Corning Inc (GLW - Free Report) is set to release fourth-quarter 2017 results on Nov 30.

Notably, the Gorilla Glass maker has a positive record of earnings surprises in the trailing four quarters, with an average beat of 8.7%. In the last quarter, Corning delivered a positive earnings surprise of 4.9%.

We expect Corning’s results to be driven by strength in the optical communications segment, primarily owing to strong demand for fiber products. Moreover, solid demand for Gorilla Glass 5, expanding footprint in the automotive market and acquisition of 3M’s communication market division are other catalysts.

Corning reported third-quarter 2017 adjusted earnings of 43 cents per share, beating the Zacks Consensus Estimate by 3 cents. Earnings increased 2.4%, year over year and sequentially.

Growth was driven by improvement in revenues. Core revenues increased 6% year over year to $2.70 billion, which comfortably surpassed the Zacks Consensus Estimate of $2.58 billion. Revenues increased 4.2% on a sequential basis.

The results reflect strength in the company’s Optical Communications and Specialty Materials business lines.

Corning’s shares have returned 7.7% over the past year, outperforming the industry’s 6.3% rally.

Expect What?

The Zacks Consensus Estimate for the quarter is pegged at 47 cent, reflecting a year-over-year decrease of 6%. Notably, the earnings estimate has moved north over the last 30 days. Further, Zacks Consensus Estimate for revenues is pegged at $2.63 billion, up roughly 3.2% from the year-ago quarter.

Let’s see how things are shaping up prior to this announcement.

Acquisitions and Product Adoptions: Key Catalysts

Corning recently announced that it has agreed to take over 3M Company’s (MMM - Free Report) Communication Markets Division completely in an all-cash deal for approximately $900 million. Acquisition of 3M’s communication market division will not only strengthen the company’s Optical Communications worldwide market access but also expand Corning’s product portfolio. Moreover, it expects the deal to add 7-9 cents to 2019 earnings.

Considering growth witnessed by the Optical Communications market in the last few years, this deal will boost Corning’s revenues and increase overall market share.

Further, Ford’s use of Corning Gorilla Glass for its Ford GT is aiding the company to successfully penetrate the 6 billion-square-foot auto glazing market. Corning has also announced a joint venture with Saint-Gobain Sekurit to manufacture, develop and sell lightweight automotive glazing solutions. This venture has allowed the company to move forward in the value chain beyond glass to manufacture and sell glazing solutions with a leading producer.

We expect sales to benefit from strong demand for fiber products, as reflected by the Verizon Communications Inc (VZ) deal, which was signed in April.

Moreover, the company remains focused on expanding footprint in the automotive market driven by gas particulate filters (GPFs) and a Gorilla-sized automotive glass business.

Optical Communications sales are anticipated to increase high-single digit percentage on a year-over-year basis in the fourth quarter.

Environmental Technologies sales are projected to increase by low-teens percentage, while Specialty Materials sales are anticipated to increase by low-to-mid teens percentage range. The Zacks Consensus Estimate for Environmental Technologies and Specialty Materials are currently pegged at $275 million and $389 million, respectively.

The Life Sciences business will grow mid-single digit percentage from the year-ago quarter. The Zacks Consensus Estimate for Life Sciences revenues is currently pegged at $217 million.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The sell-rated stocks (Zacks Rank #4 or 5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Corningcarries a Zacks Rank #3 and its Earnings ESP is +1.70%.

Some Other Stocks With Favorable Combination

Here are a couple of companies which, as per our model, have the right combination of elements to post an earnings beat this quarter:

Lockheed Martin Corporation (LMT - Free Report) , with an Earnings ESP of +0.31% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

SAP SE (SAP - Free Report) , with an Earnings ESP of +7.58% and a Zacks Rank of 3.

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