Corning profit rises in 3Q, but misses view

AP News
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Posted: Nov 01, 2010 5:02 PM
Corning profit rises in 3Q, but misses view

Corning Inc. said Monday its profit jumped 22 percent in the third quarter but it missed Wall Street expectations on lower sales of glass for flat-panel televisions.

Its shares rose despite concerns about weaker retail demand in the United States for liquid-crystal-display TVs. Because of ample supplies, the world's largest maker of LCD glass said it expects a more pronounced drop than usual in LCD glass prices in the current quarter.

Corning warned in September that LCD volume might slip 5 percent in the third quarter from an unusually high plateau in the second quarter. But volume fell 8 percent as some Asian panel makers moderated production to avoid an inventory buildup.

The glass pioneer also makes auto-pollution filters, ultra-strong cover glass for cell phones, and is the world's largest producer of optical fiber and cable.

Its net income rose to $785 million, or 50 cents per share, in the July-September period, up from $643 million, or 41 cents, a year earlier.

Excluding one-time items, however, adjusted earnings amounted to 51 cents a share _ a penny short of Wall Street expectations.

Revenue rose 8 percent to $1.6 billion from $1.48 billion. Analysts surveyed by Thomson Reuters expected slightly higher revenue of $1.61 billion.

Its stock rose 22 cents, or 1.2 percent, to $18.50. It has traded in a 52-week range of $14.14 to $21.10.

Analyst Brian White of Ticonderoga Securities in New York attributed the rise in part to the broader market's rally Monday.

"It was a disappointing report and a disappointing outlook," White said. "It's been very clear the trends in the LCD market have been deteriorating. The U.S. market has had five consecutive months of year-over-year decline for LCD-TVs, which is unprecedented."

Revenue in Corning's display technologies segment fell 5 percent to $643 million from $679 million in last year's third quarter.

Chief Executive Wendell Weeks that "while our LCD glass business adjusted with the supply chain correction that occurred in the third quarter, global retail demand for LCD products continued to show year-over-year growth in all markets other than televisions in the U.S."

Corning expects glass prices to fall in the mid-single-digit percentage range in the fourth quarter. Year-over-year glass market demand, it said, could be flat to slightly lower in the quarter.

U.S. sales of LCD-TVs fell 3 percent in July, 11 percent in August and 8 percent in September.

"We believe the lack of retail promotions during these months was a contributing factor," Jim Flaws, Corning's chief financial officer, said in a conference call with analysts. "LCD televisions are still a very price-elastic product."

But domestic retailers, he said, are planning "significant holiday promotions later this quarter, so we expect to see some year-over-year unit growth in November and December."

DisplaySearch, a market-research firm based in Austin, Texas, estimates that 188 million LCD-TVs will be shipped worldwide in 2010, up 29 percent from 2009. But in North America, shipments are expected to edge up just 3.2 percent to 38.5 million in 2010.

"It's a healthy market but ... demand really hasn't quite been living up to expectations this year," said DisplaySearch analyst Paul Gagnon.

"In North America, we've been waiting for the market to rebound, and largely it's been a result of very mild price erosion this year. It could be the case that consumers are just waiting for a holiday period to arrive before they come out shopping."

Based in the western New York town of the same name, Corning employs 24,500 people.

Propelled by Gorilla glass, specialty materials sales surged 77 percent to $159 million in the quarter.

Gorilla is a scratch-resistant protective sheath for cell phones, tablets and other mobile devices. It generated $80 million in revenue in 2009 but soaring demand could boost sales to $1 billion next year as the glass begins to migrate this quarter to high-end TVs.

Environmental technologies sales jumped 25 percent to $208 million from $167 million, driven by gains for auto-pollution filters.

Revenue in Corning's telecommunications unit rose 3 percent to $464 million on higher demand for fiber-to-the-home products in North America and private networks.

Life-sciences revenue was unchanged at $125 million, reflecting Corning's acquisition of Axygen BioScience Inc. as it shifts beyond a heavy focus on display glass. It bought the maker of plastic labware and liquid handling products for research labs for about $400 million in September.