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Will Top-Line Growth Support Corning's (GLW) Q2 Earnings?

Zacks Equity Research

Corning Incorporated GLW is scheduled to report second-quarter 2019 results on Jul 30, before the opening bell. In the last reported quarter, the company delivered a positive earnings surprise of 2.6%. Markedly, Corning surpassed the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average beat being 3.8%.

The specialty glass maker is likely to report higher revenues in the to-be-reported quarter on the back of healthy growth dynamics. Whether this can result into an earnings beat remains to be seen.

Let’s find out how things are shaping up prior to the announcement.

Factors at Play

During the June quarter, Corning unveiled a new glass substrate — Astra Glass. This cutting-edge solution has been optimized for medium-to-large size, immersive displays in high-end tablets, notebooks and 8K TVs, and will help fortify the company’s market leadership in glass technology.

The company aims to maintain a healthy momentum by continuing to invest in its focused and cohesive portfolio to drive long-term growth. Notably, Astra Glass complements Corning’s portfolio of display substrates, along with EAGLE XG Glass and Lotus NXT Glass.

Corning is well positioned to drive its business across markets with increasing traction of technologies like Gorilla Glass, Augmented Reality Precision Glass Solutions, and Iris Glass in smart devices. The company should benefit from the commercialization of innovative technologies that have been formulated to align with key industry trends.

Top-Line Growth

Corning expects noble initiatives to get translated into top-line growth in the second quarter. The Zacks Consensus Estimate for net sales from the Optical Communications segment, which accounts for the lion’s share of total revenues, is currently pegged at $1,109 million. It reported $1,023 million a year ago. Healthy revenue growth from this segment is likely to be driven by strong demand from data center and carrier customers.

For the second quarter, net sales from Display Technologies are expected to be $822 million. It reported $780 million in the year-ago quarter. Corning expects its display glass volume to grow faster than the overall market, driven by the Gen 10.5 production ramp up.

Net sales from Specialty Materials are estimated to rise to $371 million from $343 million reported a year ago. While net sales from the Environmental Technologies segment are expected to increase to $352 million from $317 million, the same from Life Sciences are projected to be $256 million. Consequently, for the second quarter, the Zacks Consensus Estimate for total revenues stands at $2,975 million. It reported $2,759 million in the year-earlier quarter. Adjusted earnings per share are pegged at 44 cents, up from 38 cents reported a year ago.

What Our Model Says

Our proven model does not conclusively show that Corning is likely to beat earnings estimates this quarter as it does not possess one of the two key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you’ll see below:

Earnings ESP: Corning’s Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00% as both are pegged at 44 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Corning Incorporated Price and EPS Surprise

Corning Incorporated Price and EPS Surprise

Corning Incorporated price-eps-surprise | Corning Incorporated Quote

Zacks Rank: Corning currently has a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s 0.00% Earnings ESP makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Woodward, Inc. WWD with an Earnings ESP of +5.13% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

TELUS Corp. TU with an Earnings ESP of +2.61% and a Zacks Rank #2.

Ciena Corp. CIEN with an Earnings ESP of +5.26% and a Zacks Rank #2.

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