Yahoo Finance Corning (NYSE:GLW) Posts Q2 Sales In Line With Estimates But Stock Drops
Glass and electronic component manufacturer Corning (NYSE:GLW) reported results in line with analysts' expectations in Q2 CY2024, with revenue up 3.4% year on year to $3.6 billion. On the other hand, next quarter's revenue guidance of $3.7 billion was less impressive, coming in 2.3% below analysts' estimates. It made a non-GAAP profit of $0.47 per share, improving from its profit of $0.45 per share in the same quarter last year.
Is now the time to buy Corning? Find out in our full research report.
Corning (GLW) Q2 CY2024 Highlights:
Revenue: $3.6 billion vs analyst estimates of $3.58 billion (small beat)
EPS (non-GAAP): $0.47 vs analyst expectations of $0.47 (in line)
Revenue Guidance for Q3 CY2024 is $3.7 billion at the midpoint, below analyst estimates of $3.79 billion
EPS (non-GAAP) Guidance for Q3 CY2024 is $0.52 at the midpoint, below analyst estimates of $0.55
Gross Margin (GAAP): 36.1%, in line with the same quarter last year
Free Cash Flow of $279 million is up from -$62 million in the previous quarter
Market Capitalization: $36.56 billion
Wendell P. Weeks, Chairman and Chief Executive Officer, said, “Our strong second-quarter results exceeded the guidance we provided in April and marked a return to year-over-year core sales and EPS growth. The outperformance was driven primarily by the strong adoption of our new optical connectivity products for generative AI, which drove record sales in the Enterprise portion of our Optical Communications business. The opportunity is only growing; in fact, in the third quarter, we reached an agreement with Lumen Technologies that uses our new gen-AI fiber and cable system to facilitate Lumen’s build of a new network to interconnect AI-enabled data centers.”
Supplying windows for some of the United States’s earliest spacecraft, Corning (NYSE:GLW) provides glass and other electronic components for the consumer electronics, telecommunications, automotive, and healthcare industries.
Electronic Components
Like many equipment and component manufacturers, electronic components companies are buoyed by secular trends such as connectivity and industrial automation. More specific pockets of strong demand include data centers and telecommunications, which can benefit companies whose optical and transceiver offerings fit those markets. But like the broader industrials sector, these companies are also at the whim of economic cycles. Consumer spending, for example, can greatly impact these companies’ volumes.
Sales Growth
A company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one tends to grow for years. Unfortunately, Corning's 2.6% annualized revenue growth over the last five years was weak. This shows it failed to expand in any major way and is a rough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Corning's history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 4.4% annually.
We can better understand the company's revenue dynamics by analyzing its most important segments, Optical Communications and Display Technologies, which are 30.9% and 28.2% of revenue. Over the last two years, Corning's Optical Communications revenue (optical fiber & cables) averaged 9.6% year-on-year declines. On the other hand, its Display Technologies revenue (glass for flat panel displays) averaged 2% growth.
This quarter, Corning grew its revenue by 3.4% year on year, and its $3.6 billion of revenue was in line with Wall Street's estimates. The company is guiding for revenue to rise 7% year on year to $3.7 billion next quarter, improving from the 5.6% year-on-year decrease it recorded in the same quarter last year. Looking ahead, Wall Street expects sales to grow 7.9% over the next 12 months, an acceleration from this quarter.
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Operating Margin
Corning has done a decent job managing its expenses over the last five years. The company has produced an average operating margin of 8.9%, higher than the broader industrials sector.
Looking at the trend in its profitability, Corning's annual operating margin rose by 2.9 percentage points over the last five years, showing its efficiency has improved.
In Q2, Corning generated an operating profit margin of 5.2%, down 2.8 percentage points year on year. Since Corning's operating margin decreased more than its gross margin, we can assume the company was recently less efficient because expenses such as sales, marketing, R&D, and administrative overhead increased.
EPS
We track the long-term growth in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company's growth was profitable.
Sadly for Corning, its EPS declined by 1.7% annually over the last five years while its revenue grew by 2.6%. However, its operating margin actually expanded during this timeframe, telling us non-fundamental factors affected its ultimate earnings.
Diving into the nuances of Corning's earnings can give us a better understanding of its performance. A five-year view shows Corning has diluted its shareholders, growing its share count by 9.5%. This dilution overshadowed its increased operating efficiency and has led to lower per share earnings. Taxes and interest expenses can also affect EPS but don't tell us as much about a company's fundamentals.
Like with revenue, we also analyze EPS over a shorter period to see if we are missing a change in the business. For Corning, its two-year annual EPS declines of 12.4% show its recent history was to blame for its underperformance over the last five years. These results were bad no matter how you slice the data.
In Q2, Corning reported EPS at $0.47, up from $0.45 in the same quarter last year. This print was close to analysts' estimates. Over the next 12 months, Wall Street expects Corning to grow its earnings. Analysts are projecting its EPS of $1.70 in the last year to climb by 25.7% to $2.13.
Key Takeaways from Corning's Q2 Results
We enjoyed seeing Corning exceed analysts' Display Technologies revenue expectations this quarter. On the other hand, its revenue and EPS guidance for next quarter underwhelmed, sending the stock lower. Overall, this quarter seemed decent, but the market was likely expecting a better outlook. The stock traded down 5.1% to $40.48 immediately after reporting.
So should you invest in Corning right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
