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What to Watch When Corning Releases Earnings Next Week

Steve Symington, The Motley Fool

Corning (NYSE: GLW) is set to release first-quarter 2019 results next Tuesday, April 30. With shares up more than 30% over the past year, and 16% so far in 2019 on the heels of its impressive fourth-quarter 2018 report in late January, investors can't help speculating whether the glass technologist was able to extend its strength into the new year.

Let's zoom in, then, for a better idea of what to watch when Corning's latest quarterly update arrives.

On Corning's headline numbers

Corning does not provide specific quarterly revenue or earnings guidance. But management did indicate that core sales, gross margin dollars, and net income should climb in the double-digit range for the first quarter. Gross margin should also continue to expand in 2019 (from 42% in the second half of 2018) -- though Corning cautioned this expansion could be muted at the start of the year as it makes investments to meet demand in the optical, automotive glass, and gasoline particulate filter (GPF) markets.

Still, we should keep in mind that Wall Street's near-term reaction will probably lean heavily on Corning's specific headline numbers. So for perspective -- and though we should take that reaction with a grain of salt -- most analysts expect first-quarter revenue to climb 12.3% to $2.82 billion, a modest deceleration from last quarter's 15% growth, translating to earnings of $0.39 per share.

Corning scientists pouring molten glass onto a tray

Image source: Corning.

Zooming in

As for Corning's individual business segments, display technologies should benefit from a mid-single-digit growth from the broader display glass market, and Corning expects its own display glass volume growth to be "significantly" higher as it takes market share and improves operational efficiency. In keeping with industry trends for the past several years, we should also see a continued moderation in glass-price declines.

At Corning's optical business -- which represents its single largest segment ahead of display technologies -- sales are expected to climb in the low-20% range, driven by both large network- and cloud-customer projects and the inclusion of sales from Corning's $900 million acquisition of 3M's communication markets divisionm a deal that closed last June.

Meanwhile, specialty materials revenue should climb in the mid- to high-single-digit range, depending on how quickly OEM customers adopt innovations including Corning's latest Gorilla Glass cover glass variants.

Environmental technology and life sciences sales should similarly rise in the mid-single-digit range this quarter. The former will rely on incremental GPF sales as customers move to adopt new emissions regulations in China. The latter will be driven by market-share gains as more customers shift toward Corning's extensive portfolio of laboratory-equipment products.

"Potential upside" ahead

When Corning provided its preliminary full-year outlook in January, management also told investors to expect continued operating improvements with growth in both core sales and net income for 2019. To that end, consensus estimates predict Corning's 2019 revenue will climb 7.2% to $12.2 billion, translating to 13.5% growth in earnings per share to $2.02.

That said, in January Corning CFO Tony Tripeny noted that the company's optimism was muted somewhat by conservative estimates for TV and automotive demand in China, particularly given the shaky economic environment at the time.

"If China's demand is better, there is an opportunity for upside," he elaborated.

Listen closely, then, for any updates next week on what Corning has seen in the Middle Kingdom. If Corning can couple any improvements there with solid execution across its various business segments elsewhere, this quarterly report could offer plenty of fresh reasons for Corning investors to be excited for the future.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends 3M and Corning. The Motley Fool has a disclosure policy.