- Thanks to a weak yen and soft PC/TV sales, Corning's (GLW +1.4%) core Display Technologies segment saw revenue drop 21% Y/Y in Q4 (14% exc. forex) to $732M. Division net income fell 53% to $243M, and core earnings (excludes forex and forex hedges, among other things) 34% to $234M. As expected, glass volumes fell slightly Q/Q, and prices fell less Q/Q than in Q3.
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Segment performance: Optical Communications sales rose 9% Y/Y to $736M, and core earnings fell by $1M to $47M; strong data center fiber demand likely boosted sales. Environmental Technologies sales rose 2% to $254M; core earnings fell by $7M to $29M. Specialty Materials (includes Gorilla Glass) revenue fell 14% to $275M; core earnings rose by $14M to $44M.
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Display Technologies guidance: LCD glass volume is expected to drop by a mid-to-high single-digit % Q/Q in Q1, with lower factory utilization among panel makers (expected to lower supply chain inventories) weighing. For 2016, glass volume is expected to grow by a mid-single digit %, aided by a low-single digit increase in TV sales and an increase in average screen size of at least 1.5". Moderate Q/Q price declines are expected to occur in Q1 and the whole of 2016.
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Other guidance: Specialty Materials revenue is expected to drop by a mid-teen % Y/Y in Q1 (iPhone-related weakness could be weighing), but grow by a low-teen % in 2016 (the iPhone 7 launch should provide a lift). Optical Communications sales are expected to grow by a low-to-mid single digit % in Q1, and by a mid-single digit % in 2016. Environmental Technologies sales are expected drop by 10% in Q1 - weak North American heavy-duty truck sales are blamed - and by a low-single digit % in 2016.
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Financials: A $1.25B accelerated buyback (announced in October, as part of a $4B buyback authorization) was finished in January. Q4 gross margin fell 300 bps Y/Y on a reported basis to 38%, and 200 bps on a core performance basis to 42%. Adjusted SG&A spend fell by 3% Y/Y to $370M; adjusted R&D spend fell by less than 1% to $208M. Free cash flow was $628M in Q4, and $1.46B in 2015. Corning ended Q4 with $4.6B in cash/short-term investments, and $4.5B in debt.
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Corning's Q4 results, earnings release