GLW Earnings Preview; Has Corning turned the corner?
2min read Corning (GLW) is set to report its Q2 earnings tomorrow before the market opens. Analysts are expecting earnings of $0.46 per share on revenue of $3.55 billion.
On July 8, Corning announced that it anticipates Q2 core sales to reach $3.6 billion, up from the previously expected $3.4 billion, and core EPS to be at the high end or slightly above the guidance range of $0.42-0.46. This positive revision is primarily attributed to new product designs for generative AI and strength in other segments, indicating that Corning's turnaround efforts are beginning to bear fruit.
Management has reiterated that Q1 2024 will be the lowest quarter of the year and expects to generate more than $3 billion in incremental annualized revenue over the next three years. This outlook has led Oppenheimer to raise its estimates for 2024 and 2025, based on earlier-than-expected contributions from sales to generative AI markets. Corning's Q2 guidance highlights a strategic shift, with the company emphasizing its potential to capitalize on AI-driven demand and other growth opportunities.
Corning's Q2 guidance suggests that Q1 marked the low point for sales and profits for the year, reinforcing the company's belief in its recovery trajectory. Under its "springboard" program, Corning aims to add $3 billion to annualized revenue within the next three years. This program is expected to drive strong incremental profits and cash flow, leveraging the company's existing production capacity and technical capabilities. This positive outlook spans Corning's five market-access platforms (MAPs): Optical Communications, Mobile Electronics, Display, Life Sciences, and Automotive.
The rise of generative AI has significantly bolstered demand for Corning's Optical Communications segment, particularly for AI data centers. This segment, which includes low-loss optical fiber used across telecommunications networks, has seen substantial wins, translating into expected order and sales growth throughout FY24. Additionally, TV panel makers have started to increase their utilization levels in response to growing retail demand, with Corning's strategic production adjustments expected to enhance profitability in Q2.
Corning's Specialty Materials segment is also poised to benefit from a recovery in the smartphone industry. As a supplier to Apple's latest iPhones, Corning stands to gain from increased demand for AI-enabled devices. This anticipated surge in demand is supported by recent sales spikes in China, indicating a potential positive trend in domestic markets. PCs are similarly gaining momentum, with AI-powered PCs expected to drive further growth in the second half of 2024.
Overall, Corning's Q2 guidance signals that the company is turning a corner, leveraging AI demand and a broader retail recovery to overcome previous macroeconomic headwinds. While challenges remain, such as the uncertainty around consumer spending on new technology, investors are optimistic about Corning's strategic initiatives and growth potential. The company's strong market positions, innovative products, and deep customer relationships are expected to drive significant incremental profit and cash flow in the coming years, positioning Corning well for future success.