Corning Incorporated (NYSE:GLW) announced its results for the third quarter ended Sept. 30, 2016.
“Corning’s strong third-quarter results reflect the increasing momentum that we expected in the second half of this year. Sales and gross margins increased in every business segment year over year. We also grew the company’s sales, core earnings and core EPS both sequentially and year over year,” Wendell P. Weeks, chairman, chief executive officer, and president, said. “Our operating results and progress on key growth initiatives continue to reinforce our confidence in Corning’s strategy.”
“Third-quarter core earnings grew by 16% versus last year excluding core equity earnings from the former Dow Corning Corporation’s silicones business, which no longer contribute to our results. Even without this adjustment, core earnings were 4% higher. We are very pleased by this strength and expect continued year-over-year core sales, core earnings, and core EPS growth in the fourth quarter,” R. Tony Tripeny, senior vice president and chief financial officer, added.
Update on Strategy and Capital Allocation Framework
In October 2015, Corning’s management committed to a Strategy and Capital Allocation Framework designed to create significant value for shareholders by leveraging the company’s financial strength and focusing the company’s portfolio. The Framework includes a commitment to delivering at least $12.5 billion to shareholders while investing $10 billion in growth opportunities through 2019.
“Since the Framework was announced, we have gained traction with customers on our growth initiatives, realigned our interest in Dow Corning, and are on track to return more than $6 billion to shareholders by year end. We are making great progress and creating significant value for our shareholders,” Weeks added.
Highlights of the company’s achievements in the third quarter include:
- Launch of a previously announced $2 billion accelerated share repurchase.
- Introduction and adoption of two new Corning® Gorilla® Glass solutions: Gorilla Glass 5, which provides superior drop performance for smartphone devices, and Gorilla Glass SR+, which delivers an unparalleled combination of scratch resistance, optical clarity, and toughness for wearable devices.
- Additional platform wins with major OEMs for Corning® DuraTrap® GC filters that reduce particulate emissions from gasoline direct-injection vehicles.
- Announcement that Mercedes-Benz Stadium, home of the Atlanta Falcons beginning in 2017, will use the Corning ONE platform as a single optical core for its Wi-Fi, cellular, and video network.
- Strong response to the debut of Gorilla Glass in auto interiors at the Paris Auto Show.
Panel makers increased utilization to meet strong set maker demand in advance of the fourth-quarter peak retail season. As a result, glass market volume was up by a high-single digit percentage sequentially, above expectations. Corning’s LCD glass volume was up slightly more than the market due to customer mix. Price declines remained moderate, as expected.
The company expects panel maker utilization to remain high and for glass supply to remain tight in the fourth quarter. Sequentially, fourth-quarter volume is expected to be consistent to slightly down, in line with the glass market, as the company’s full-year outlook has not changed.
Third-quarter sales in Optical Communications were up 6% on a year-over-year basis reflecting strong growth in fiber-to-the-home market. Hyper-scale data-center product sales were below company expectations.
Year over year, fourth-quarter sales are expected to increase by a high-single-digit percentage driven by continued fiber-to-the-home strength.
Third-quarter segment sales were up 3% from last year and slightly ahead of expectations. Light-duty substrate sales for the auto market reached a record level, driven by continued strong demand in North America, Europe, and China, and additional platform wins.
For the fourth quarter, sales are expected to be down year over year by a low-single digit percentage due to continued weakness in the heavy-duty truck markets.
Specialty Materials third-quarter segment sales were up 11% sequentially and 2% year over year, exceeding expectations. Sales during the quarter benefited from the introduction of two new Gorilla Glass products.
For the fourth quarter, sales are expected to increase by a high-single-digit percentage year over year driven by volume growth in Gorilla Glass.
Third-quarter sales in Life Sciences met expectations for low-single-digit percentage year-over-year growth, with similar year-over-year sales growth expected in the fourth quarter.
Gross Equity Earnings:
GAAP and core gross equity earnings were $19 million in the third quarter of 2016. Equity earnings in this year’s third quarter largely represent the contribution from Corning’s interest in Hemlock Semiconductor Group, formerly a part of Dow Corning. As a result of the Dow Corning strategic realignment, this year’s equity earnings do not include any contribution from the former Dow Corning silicones business.
The company’s gross equity earnings in the fourth quarter are expected to be between $75 million to $85 million due to the timing of contract commitments in Hemlock’s solar business. (Original Source)
Shares of Corning are up nearly 1% to $24.20 in pre-market trading Tuesday. GLW has a 1-year high of $24.14 and a 1-year low of $16.13. The stock’s 50-day moving average is $23.18 and its 200-day moving average is $21.30.
On the ratings front, Corning has been the subject of a number of recent research reports. In a report issued on October 19, Deutsche Bank analyst Vijay Bhagavath reiterated a Buy rating on GLW, with a price target of $25, which represents a slight upside potential from current levels. Separately, on September 28, Susquehanna’s Mehdi Hosseini reiterated a Buy rating on the stock and has a price target of $27.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Vijay Bhagavath and Mehdi Hosseini have a total average return of -1.0% and -2.1% respectively. Bhagavath has a success rate of 56% and is ranked #3068 out of 4190 analysts, while Hosseini has a success rate of 43% and is ranked #3321.
Overall, 2 research analysts have rated the stock with a Sell rating, 2 research analysts have assigned a Hold rating and 3 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $14.50 which is -39.3% under where the stock closed yesterday.
Corning, Inc. develops and manufactures specialty glass and ceramics. The company provides glass for notebook computers, flat panel desktop monitors, LCD televisions, and other information display applications; optical fiber and cable and hardware and equipment products for the telecommunications industry; ceramic substrates for gasoline and diesel engines in automotive and heavy duty vehicle markets; laboratory products for the scientific community and specialized polymer products for biotechnology applications; advanced optical materials for the semiconductor industry and the scientific community; and other technologies. It operates through five segments: Display Technologies, Optical Communications, Environmental Technologies, Specialty Materials and Life Sciences. The Display Technologies segment manufactures glass substrates for active matrix liquid crystal displays which are used primarily in notebook computers, flat panel desktop monitors, and LCD televisions. The Optical Communications segment manufactures optical fiber and cable, and hardware and equipment to being a comprehensive provider of industry-leading optical solutions across the broader communications industry pioneer optical fiber, cable and connectivity solutions. The Environmental Technologies segment manufactures ceramic substrates and filter products for emissions control in mobile and stationary applications around the world. The Specialty Materials segment manufactures products that provide more than 150 material formulations for glass, glass ceramics and fluoride crystals to meet demand for unique customer needs. The Life Sciences segment develops, manufactures and supplies scientific laboratory products.