Corning's (NYSE:GLW) Q2 gross margin was 41.6%, +60 bps Q/Q but -300 bps Y/Y and driving the quarter's EPS miss.
Contributing to the margin pressure: specialty materials (Gorilla Glass) sales, which tend to carry higher margins, were roughly flat Y/Y at $298M. Gorilla Glass sales missed expectations due to soft retail demand for smartphones/tablets and "lower-than-expected sales for planned new models." That could be a reference to Apple's sapphire production ramp ahead of the iPhone 6 launch.
On the other hand, LCD glass division sales (boosted by the Samsung deal) rose 62% Y/Y to $1.1B, with glass volumes growing by a low-teens % Q/Q (better than expected). Price declines were moderate, as expected.
Optical communications (fiber) sales were also better than expected, rising 14% to $601M. Environmental Technologies grew 25% to $285M thanks to demand for diesel emission control products, and life sciences rose 2% to $223M.
Q3 guidance: LCD glass volumes will rise by a mid-single digit % Q/Q, with price declines moderating further; optical will grow by a mid-single digit % Y/Y, environmental will grow 20%-25% Y/Y; specialty materials will grow 10% Q/Q; life sciences will be up slightly Y/Y.
With revenue up 25% Y/Y, SG&A spend rose 20% Y/Y to $318M, and R&D spend 16% to $208M. $200M was spent on buybacks. Corning has cut its full-year capex guidance by $200M to $1.3B.
Q2 results, PR