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Corning (GLW) Q4 Earnings & Revenues Beat Estimates, Up Y/Y

Zacks Equity Research

Corning Incorporated GLW reported solid fourth-quarter 2018 results driven by sales growth in each of its businesses led by investment in innovation and capacity expansions.

Net Income

On a GAAP basis, net income for the reported quarter improved significantly to $292 million or 32 cents per share from net loss of $1,412 million or loss of $1.66 per share in the year-ago quarter, primarily due to top-line growth and lower taxes. For 2018, GAAP net income was $1,066 million or $1.13 per share against net loss of $497 million or loss of 66 cents per share a year ago.

Quarterly core earnings came in at $539 million or 59 cents per share compared with $455 million or 46 cents per share in the year-earlier quarter. Adjusted earnings beat the Zacks Consensus Estimate by 2 cents.

Corning Incorporated Price, Consensus and EPS Surprise

Corning Incorporated Price, Consensus and EPS Surprise | Corning Incorporated Quote

Revenues

Quarterly GAAP net sales were up 15.1% year over year to $3,035 million driven by revenue growth in all businesses, particularly Display Technologies, Optical Communications and Environmental Technologies. For full-year 2018, GAAP net sales increased 11.6% to $11,290 million.

Quarterly core sales increased 15.2% to $3,081 million, surpassing the Zacks Consensus Estimate of $3,018 million.

Quarterly Segmental Performance

The Display Technologies segment net sales were $899 million compared with $783 million, reflecting improving pricing climate and Corning’s extended global leadership by successfully ramping Gen 10.5 production, which allowed it to grow volume faster than the overall market. The segment’s net income was $240 million compared with $206 million in the prior-year quarter.

Net sales in Optical Communications increased 25.6% year over year to $1,166 million and exceeded $1 billion for the third consecutive quarter, driven by solid demand from data center and carrier customers. The segment’s net income was $165 million compared with $99 million in the prior-year quarter.

Environmental Technologies segment net sales increased 9.6% to $319 million driven by growth in all product categories and sales of gasoline particulate filters. The segment’s net income was $42 million compared with $43 million in the prior-year quarter.

The Specialty Materials segment net sales climbed 1.5% driven by strong pull for Corning’s portfolio of premium glass products. The segment’s net income was $87 million compared with $88 million in the prior-year quarter.

The Life Sciences segment net sales were up 5.8% to $238 million as the business continued to outpace market growth. The segment’s net income was $29 million compared with $24 million in the prior-year quarter.

Other Details

Despite 14.2% year-over-year rise in cost of sales to $1,833 million, operating income increased to $464 million from $368 million owing to top-line growth.

Gross profit increased to $1,202 million from $1,032 million. Core gross profit was $1,297 million compared with $1,079 million in the prior-year quarter, with respective margins of 42% and 40%.

Cash Flow and Liquidity

For 2018, Corning generated $2,919 million of cash from operating activities compared with $2,004 million for 2017.

As of Dec 31, 2018, the company had $2,355 million of cash and cash equivalents with $5,994 million of long-term debt compared with the respective tallies of $4,317 million and $4,749 million a year ago.

2019 Outlook

Owing to excellent results in the fourth quarter, Corning expects growth in 2019 and beyond, driven by benefits from its investments as well as adoption of technologies aligned to key industry trends and the company’s cohesive portfolio.

Optical Communications is likely to grow by a low-teens percentage year over year while Environmental Technologies is expected to rise by mid-teens. In Display Technologies, glass market volume is likely to rise at mid-single-digit percentage as television screen size growth continues. For Specialty Materials, the company expects growth by a mid-single digit percentage year over year. Life Sciences’ sales are expected to increase by a low-to-mid single-digit percentage, continuing to outpace overall market growth.

The company is progressing well on Strategy and Capital Allocation Framework. Since the program began, it has returned $11.8 billion to shareholders and aims to return more than $12.5 billion.

Looking Forward

Corning is making encouraging progress on its focused portfolio objectives, remaining well poised to achieve its Strategy and Capital Allocation Framework goals. Standing at an inflection point, the company is gaining momentum. We remain impressed with the solid growth potential of the company.

Zacks Rank and Stocks to Consider

Corning currently has a Zacks Rank #4 (Sell). Better-ranked stocks in the industry include Acacia Communications, Inc. ACIA, Harmonic Inc. HLIT and Spirent Communications plc SPMYY, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Acacia has a long-term earnings growth expectation of 12.4%.

Harmonic has a long-term earnings growth expectation of 8.8%.

Spirent has a long-term earnings growth expectation of 11%.

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