Corning -3.2%; Gorilla Glass softness weighs on margins

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

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Comments (3)
  • Capt Jack Daniels
    , contributor
    Comments (1466) | Send Message
    On the presentation GLW shows Gaap eps of only 11 cents a share a 74% decrease over the previous years gaap eps despite an increase of 25% in net sales?


    Can anyone explain is this the reason shares are down over 8%.


    Was the difference related to currency exchange?
    29 Jul 2014, 10:31 AM Reply Like
  • defunkdreader
    , contributor
    Comments (186) | Send Message
    There's ~(150m) in net income on FX listed under 'constant-yen', 'constant-won', and 'purchased collars' that's excluded in management's non-GAAP calculation.


    But shares are down on Gorilla weakness from tablets.


    The long-term/stock-price impact of management totally missing their expectation of a big market (tablets) is bigger than their choice on the quarter to lay on some hedges.
    29 Jul 2014, 11:03 AM Reply Like
  • Martinbay22
    , contributor
    Comment (1) | Send Message
    Executive management is smug. Stock price in 2010 was over $22; dropped down to half its value in a year and took almost four years to claw its way back up. So, essentially the stock went nowhere for five years. Yet the CEO and his team received fat compensation and stock awards with low strike price. It seems that stock price is inconsequential to them. The Directors have no guts to call for a change in leadership. What a shame!
    29 Jul 2014, 05:19 PM Reply Like
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