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Why Is Corning (GLW) Down 0.1% Since Last Earnings Report?

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A month has gone by since the last earnings report for Corning (GLW). Shares have lost about 0.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Corning due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Corning Beats on Q2 Earnings, Expects Growth to Continue

Corning reported solid second-quarter 2021 results, wherein both the bottom line and the top line beat the respective Zacks Consensus Estimate.

Bottom Line

On a GAAP basis, net loss in the June quarter was $354 million or loss of 42 cents per share compared with a net loss of $96 million or loss of 13 cents per share in the prior-year quarter.

Core net income came in at $459 million or 53 cents per share compared with $218 million or 25 cents per share in the year-ago quarter. The improvement was driven by higher sales and expanded margins. The bottom line beat the Zacks Consensus Estimate by 2 cents.

Revenues

Quarterly GAAP net sales increased 36.7% year over year to $3,501 million, driven by strong sales growth at all five business segments. Core sales grew to $3,504 million from $2,588 million. The top line surpassed the consensus estimate of $3,403 million.

Segment Results

Net sales in Optical Communications increased 21.2% year over year to $1,075 million. Sales grew in both enterprise and carrier networks, driven by 5G, fiber-to-the-home and cloud computing projects. The segment’s net income was $148 million compared with $81 million in the prior-year quarter.

Net sales in Display Technologies were $939 million compared with $753 million in the prior-year quarter, led by an increase in glass substrate prices. The segment’s net income was $248 million compared with $152 million in the year-ago quarter.

Specialty Materials’ net sales were up 15.8% year over year to $483 million. The rise was driven by strong demand for premium cover materials, strength in the IT market and greater optical content in semiconductor manufacturing. The segment’s net income was $81 million compared with $90 million a year ago.

Environmental Technologies’ net sales jumped 80.1% year over year to $407 million, resulting from improving markets and more Corning content. Under this, automotive sales were up 68% as vehicle production improved from pandemic lows and gasoline particulate filter adoption continued in Europe and China. Diesel sales grew 101% year over year, driven by adoption of advanced exhaust after-treatment systems in preparation for China VI implementation as well as strength in the North America heavy-duty truck market. The segment’s net income was $81 million.

Net sales in Life Sciences were up 28.4% year over year to $312 million. The performance was driven by recovery in academic and pharmaceutical research labs and strong demand for bioproduction products and diagnostic-related consumables. The segment’s net income improved to $52 million from $31 million reported a year ago.

Other Details

Cost of sales increased 21.1% year over year to $2,186 million. Gross profit improved to $1,315 million from $756 million. Core gross profit was $1,326 million compared with $863 million in the prior-year quarter, with respective margins of 37.8% and 33.3%. Operating income was $575 million, which improved from a loss of $103 million.

Cash Flow & Liquidity

During the first half of 2021, Corning generated $1,494 million of net cash from operating activities compared with $798 million in the prior-year period. Free cash flow improved to $843 million from a negative $34 million.

As of Jun 30, 2021, the company had $2,320 million in cash and cash equivalents with $7,025 million of long-term debt.

Q3 Outlook

Corning anticipates strong demand and positive momentum across its businesses to continue. For the third quarter, it expects core sales in the range of $3.5 billion to $3.7 billion. Core earnings per share are estimated between 54 cents and 59 cents.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

Currently, Corning has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, Corning has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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