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Corning (GLW) Tops Q2 Earnings on Healthy Revenue Growth

Corning Incorporated GLW reported healthy second-quarter 2018 results, driven by sales growth in each of its businesses owing to strong market demand and successful ramping of capacity expansions.

Net Income

On a GAAP basis, net income improved significantly to $738 million or 78 cents per share from $439 million or 42 cents per share reported in the year-ago quarter on top-line growth.

Core earnings for the quarter came in at $359 million or 38 cents per share compared with $400 million or 39 cents per share in the year-earlier quarter. Adjusted earnings for the quarter beat the Zacks Consensus Estimate by a penny.

Corning Incorporated Price, Consensus and EPS Surprise

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

Revenues

Quarterly core revenues increased 9% year over year to $2,759 million, surpassing the Zacks Consensus Estimate of $2,678 million. The company is witnessing benefits from strategic investments and ramp-up of capacity expansion to meet the increased demand across all business segments.

Segmental Performance

The Display Technologies segment revenues were $780 million compared with $777 million, reflecting favorable pricing climate. Optical Communications revenues increased 16% year over year to $1,023 million, driven by growth in data center and carrier customers. The Environmental Technologies segment revenues increased 21% year over year to $317 million due to a shift in premium products. The Specialty Materials segment revenues climbed 2% year over year to $343 million on higher Gorilla Glass shipments. The Life Sciences business revenues were up 11% year over year to $245 million, as the business continued to outpace market growth.

Operating Details

Cost of Sales increased 10.9% year over year to $1,675 million. Operating income was $395 million compared with $385 million in the year-ago quarter. Core gross profit was $1,123 million compared with $1,057 million in the prior-year quarter, with respective margins of 41% and 42%.

Cash Flow and Liquidity

Corning generated $1,035 million of cash from operations in the first six months of 2018 compared with $471 million recorded in the prior-year period.

As of Jun 30, 2018, the company had $2,023 million of cash and cash equivalents with long-term debt of $5,099 million.

Outlook

Corning expects to reach approximately $11.3 billion as sales for full-year 2018, up from the prior guidance of approximately $11 billion, reaping the benefits of prior investments and capacity expansion. The company is on track to expand margins. Optical Communications is likely to grow by a high-teens percentage for the year, while Environmental Technologies is expected to rise by mid-teens. Display Technologies continues to make advancements toward stable returns and glass pricing continues to moderate. The ramp up of the new Gen 10.5 plant is on schedule.

For Specialty Materials, the company expects nearly 10% year-over-year sales growth in the third quarter of 2018, driven by strong shipments of new innovative products. Life Sciences’ full-year 2018 sales are expected to increase by a mid-to-high single-digit percentage.

During the April-June quarter, it returned $829 million to shareholders as part of Capital Allocation Framework.   

Zacks Rank & Other Stocks to Consider

Corning currently has a Zacks Rank #2 (Buy). Other top-ranked stocks in the broader industry include Comtech Telecommunications Corp. CMTL, Micron Technology, Inc. MU and Windstream Holdings, Inc. WIN. While Comtech and Micron sport a Zacks Rank #1 (Strong Buy), Windstream carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Comtech has a long-term earnings growth expectation of 5%. It beat earnings estimates in each of the trailing four quarters, the average being 123.7%.          

Micron has a long-term earnings growth expectation of 8.2%. It beat earnings estimates in each of the trailing four quarters, the average being 5.9%.   

Windstream exceeded earnings estimates twice in the trailing four quarters, with an average positive surprise of 23.9%.

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