Corning (GLW) Q3 Earnings Miss Estimates on Lower Demand
Corning Incorporated GLW reported soft third-quarter 2023 results, wherein both the top and bottom lines fell short of the respective Zacks Consensus Estimate. The company witnessed a top-line contraction year over year, owing to weakness in several business segments. Weak demand trends from carriers in Optical Communications and declining demand for COVID-related products in the Life Science segment primarily induced the year-over-year sales drop. However, healthy traction in Display technologies, rising demand for semiconductor materials and Gorilla Glass products partially cushioned the top line.
Net Income
Quarterly GAAP net income was $164 million or 19 cents per share compared with $208 million or 24 cents per share in the year-ago quarter. Lower net sales led to a year-over-year decline.
Core earnings were recorded at $386 million or 45 cents per share, down from $438 million or 51 cents per share in the year-ago quarter. The bottom line missed the Zacks Consensus Estimate by a penny.
Corning Incorporated Price, Consensus and EPS Surprise
Corning Incorporated price-consensus-eps-surprise-chart | Corning Incorporated Quote
Revenues
Net sales on a GAAP basis declined to $3,173 million from $3,488 million reported in the year-ago quarter. Declining revenues in several verticals, including Optical Communications and Life Science impeded the top-line growth during the quarter. Core sales were down 6% to $3,459 million. The top line missed the consensus estimate of $3,502 million.
Segment Results
Optical Communications generated $918 million in revenues, down 30% from $1,317 million in the year-ago quarter. The top line fell short of our revenue estimate of $1,028 million. Net income from this segment declined to $91 million from $183 million reported in the year-ago quarter. Sales in the quarter were affected by reduced order rates from carriers.
Display Technologies registered $972 million in revenues, up 42% year over year. Net sales missed our revenue estimate of $1025.9 million. The segment’s net income was $242 million compared with the prior-year quarter’s tally of $134 million. The sharp 81% increase in net income was mainly driven by price hikes. Despite sales growth, the volume was lower than management’s expectations.
Net sales from Specialty Materials stood at $563 million, up 8% year over year. The top line marginally surpassed our estimate of $467.7 million. Strong demand for semiconductor materials and greater sales of Gorilla Glass induced by customer product launches were key growth drivers for this segment. Net income was $72 million, up from $33 million reported in the prior-year quarter.
Environmental Technologies contributed $449 million in net sales, up from $425 million in the year-ago quarter. Positive momentum for gasoline particulate filters in China supported the gain from this segment. However, weakness in heavy-duty markets in North America partially reversed this trend. Net income was $99 million, up from $87 million in the year-earlier quarter, driven by various productivity enhancement initiatives.
Revenues from the Life Sciences segment declined to $230 million from the year-earlier quarter’s figure of $312 million. Segment net income was $13 million compared with $43 million in the year-ago quarter. Declining demand trends for COVID-related products in China and inventory adjustments affected the top line from this segment.
Hemlock and Emerging Growth Businesses reported a 20% decline in net sales year over year to $327 million. The company reported a net loss of $8 million from this segment against a net income of $18 million in the year-ago quarter. Lower sales in Corning Pharmaceutical Technologies and the decreasing price of solar polysilicon impacted the top line.
Other Details
Quarterly gross profit decreased to $1,004 million from $1,062 million, with respective margins of 31.6% and 30.4%. Operating income was $236 million, down from $292 million in the prior-year quarter. Core gross margin was 37%, up from 36.1% in the year-ago quarter, owing to various productivity and pricing improvement actions across business operations.
Cash Flow & Liquidity
During the September quarter, Corning generated $722 million of net cash from operating activities compared with $706 million in the year-earlier quarter. The company registered a free cash flow of $466 million compared with the prior year’s figure of $255 million.
As of Sep 30, 2023, Corning had $1,639 million in cash in cash and cash equivalents with $7,210 million of long-term debt.
Outlook
For the fourth quarter of 2023, core sales are estimated at $3.25 billion. Management expects that the core gross margin will follow a similar trend like the third quarter. Core EPS is anticipated to be in the range of 37-42 cents, with a strong free cash flow. Management remains committed to investing in innovation and improving essential capabilities to position the company to capture the growth potential when the market recovers.
Zacks Rank & Stocks to Consider
Corning currently carries a Zacks Rank #4 (Sell)
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