Corning Outlines Slower Growth Expectations (GLW)

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Corning Inc. (NYSE: GLW) is addressing the slowing economies and supplies and how these will impact the company.   Vice Chairman and CFO James Flaws is presenting some longer-term projection data at the Maxim Group Growth Conference today in New York City.  Third-quarter glass volume shipments for the company’s wholly owned business and Samsung Corning Precision Glass Co., Ltd. grew less than expected at a rate of 2% sequentially, as there was a more pronounced shift in glass demand to Corning’s equity venture.  Corning Precision Glass volume was up 12%, but volume at Corning’s wholly owned business was down 10%.  Despite lower volume, it is reaffirming its earnings guidance and there is an obvious case of "Good News, Bad News" to consider.

Corning still anticipates that third quarter earnings will be in linewith its September revised guidance of $0.43 to $0.45 EPS beforeitems.  If you think that these tech companies and other companiesaren’t bracing for a slowdown, you better see some of the comments.Flaws noted, "We are obviously in uncertain economic times. At Corning,we are making decisions now, to be ready for the potential of aworsening economy…. we will control the increase in our R&Dspending to be much less than in recent years…"

Flaws noted that data in the U.S. and worldwide indicate that LCDtelevision sales remained strong through August, with a 29% gain in theU.S. alone.  The company still believes that the industry remains ontrack to ship 105 million LCD TVs into retail this year, with 40% ofsales in the holioday Q4 period.  He will not provide specific guidanceat the conference.

The company is noting that Telecommunications, EnvironmentalTechnologies and Life Sciences segments have traditionally seen lowersales in the fourth quarter and it is already seeing an impact onEnvironmental Technologies business segment from the slowdown in theauto industry.

As far as beyond this year, it looks as though guidance is going to benon-existent or murky at best.   The current economic turbulencecreates significant uncertainty going forward and Corning is changing2009 worldwide LCD expected glass market growth.  It now sees a rangeof 15% to 25% rather than prior growth range targets of 20% to 25%.Corning is also prepared to adjust production capacity to match demandand Corning has decided to delay construction and startup of capacityassociated with the fourth phase of its Taichung facility until laterin 2010. 

It may idle other tanks or keep them closed after maintenance to lowercapacity and operational costs if necessary.  Corning’s total capitalspending for 2008 and 2009 is expected to be approximately $400 millionto $600 million lower with 2008 capital spending to be between $1.8billion and $1.9 billion.  That is a reduction of $300 million to $400million.  Its 2009 capital spending is expected to be $100 to $200million lower in a range of between $1.6 billion and $1.7 billion.

Shares had been down in the initial reaction to this news.  Shares were down 3% but are now actually trading up by more than 1% at $14.14 right before the open.  We have actually been expecting slower growth and lower earnings as a result of the current climate.  Tech companies won’t be immune.  But we also outline Corning and five others as being "Amazingly Cheap Technology Stocks" for our Special Situation readers over the last week. 

We do expect more weakness to come and expect lower earnings from many key players.  No one is immune today.

Jon C. Ogg
October 7, 2008