Corning (GLW) Q2 Earnings Match Estimates, Revenues Beat
Corning Incorporated GLW reported healthy second-quarter 2023 results, with the top line beating the Zacks Consensus Estimate and the bottom line matching the same.
The New York-based advanced glass substrates producer reported lower revenues year over year, owing to sluggish demand trends in several end markets and inventory adjustments. However, positive momentum in Display Technologies and Environmental Technologies vertical, combined with management’s various initiatives to boost profitability, partially reversed the negative trend.
Net Income
Net income on a GAAP basis was $281 million or 33 cents per share compared with $563 million or 66 cents per share in the prior-year quarter. The decline was primarily attributable to year-over-year revenue contraction.
Core net income was reported at $388 million or 45 cents per share, down from $489 million or 57 cents per share in the year-ago quarter. The bottom line matched the Zacks Consensus Estimate.
Corning Incorporated Price, Consensus and EPS Surprise
Corning Incorporated price-consensus-eps-surprise-chart | Corning Incorporated Quote
Revenues
Quarterly revenues on a GAAP basis declined to $3,243 million from $3,615 million reported in the year-ago quarter. The top line was negatively affected by declining trends in the Optical Communications, Specialty Matters and Life Science segments. Core sales stood at $3,482 million, down 7% year over year from $3,762 million. The top line surpassed the consensus estimate of $3,468 million.
Segment Results
Revenues from Optical Communications were $1,066 million, down 19% from the prior-year quarter’s level of $1,313 million. The top line fell short of our revenue estimate of $1,205.6 million. The segment's net income declined to $140 million from $182 million reported in the year-ago quarter. Weak demand for passive optical network products impacted the vertical. However, productivity enhancement partially cushioned the net sales.
Display Technologies contributed $928 million in revenues, up 6% year over year. Net sales surpassed our revenue estimate of $791.5 million. Net income from the segment was $208 million compared with the prior-year quarter’s figure of $228 million. Greater volume from increased panel maker utilization drove the net sales from this vertical.
Net sales from Specialty Materials were $423 million, down 13% year over year. The top line marginally surpassed our estimate of $420 million. Despite higher Gorilla Glass sales, the persistence of low demand in end markets hindered revenue growth. Expenses associated with new product launches affected the net income from this vertical. Net income was $33 million, down from $91 million reported in the prior-year quarter.
Revenues from Environmental Technologies reported 28% year-over-year growth to $457 million. The segment’s gain was driven by healthy demand for gasoline particulate filters in China and improved productivity. Net income was $107 million, up from $62 million in the year-earlier quarter.
Life Sciences segment revenues declined to $231 million from the year-earlier quarter’s tally of $312 million. Segment net income was $11 million compared with $37 million in the year-ago quarter. The segment’s revenues were affected by decreasing demand for COVID-related products in China, combined with inventory adjustments.
Hemlock and Emerging Growth Businesses reported a 10% decline in net sales year over year to $377 million. Net income from the segment was $26 million compared with $25 million in the year-ago quarter.
Other Details
Gross profit declined to $1,013 million from $1,246 million, owing to lower revenues. Operating income totaled $279 million, down from $490 million in the year-ago quarter. Core gross margin and operating margin declined to 36.2% and 17.5%, respectively, from 37.5% and 18.8% reported in the prior year quarter.
Cash Flow & Liquidity
During the second quarter of 2023, Corning generated $619 million of net cash from operating activities compared with $758 million in the prior-year period. The company registered a free cash flow of $310 million compared with the prior year’s figure of $440 million.
As of Jun 30, 2023, Corning had $1,538 million in cash in cash and cash equivalents with $7,437 million of long-term debt.
Outlook
For the third quarter of 2023, core sales are expected to be $3.5 billion. The company expects core earnings per share to be in line with the second quarter figure. Despite the weak end-market environment, management will continue to focus on improving profitability and cash flow generation in the upcoming quarters.
Zacks Rank & Stocks to Consider
Corning currently carries a Zacks Rank #3 (Hold).
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