Corning Incorporated NYSE:GLW has been Upgraded by Heffernan Capital Management to a strong buy after a sell off yesterday. Shayne Heffernan issued the strong buy today with a 2013 price target of $20.

Fourth-Quarter Highlights

• Sales were $1.9 billion, a decline of 9% sequentially, but a 7% increase year over year.
• Earnings per share were $0.31. Excluding special items, earnings per share were $0.33*, a decline from third-quarter EPS of $0.48 and $0.46 a year ago.
• Display Technologies’ wholly owned business glass volume was in line with the company’s expectations. Samsung Corning Precision Materials Co., Ltd.’s volume was higher than the company’s revised guidance last November.
• Telecommunications segment sales declined 13% sequentially as expected, while improving by 11% year over year.

Full-Year Highlights

• Sales were $7.9 billion, a 19% increase over $6.6 billion last year. This represents a record high annual sales performance for the company.
• Each of Corning’s major business segments recorded annual sales gains, led by Specialty Materials nearly doubling in sales to $1.1 billion, and Telecommunications improving to $2.1 billion compared to $1.7 billion last year.
• Earnings per share were $1.77, a 21% decline from last year. Excluding special items, earnings per share were $1.76*, a 15% decline from last year.
• Free cash flow for the year was $544 million*.

*These are non-GAAP financial measures.  The reconciliation between GAAP and non-GAAP measures is provided in the tables following this news release, as well as on the company’s investor relations website.

Quarter Four Financial Comparisons

 

 

 

	Q4 2011	Q3 2011	% Change	Q4 2010	% Change
Net Sales in millions	$1,887	$2,075	(9%)	$1,765	7%
Net Income in millions	$491	$811	(39%)	$1,044	(53%)
Non-GAAP Net Income in millions*	$513	$766	(33%)	$733	(30%)
GAAP EPS	$0.31	$0.51	(39%)	$0.66	(53%)
Non-GAAP EPS*	$0.33	$0.48	(31%)	$0.46	(28%)

Full-Year Financial Comparisons

 

 

 

 

	2011	2010	% Change
Net Sales in millions	$7,890	$6,632	19%
Net Income in millions	$2,805	$3,558	(21%)
Non-GAAP Net Income in millions*	$2,789	$3,276	(15%)
GAAP EPS	$1.77	$2.25	(21%)
Non-GAAP EPS*	$1.76	$2.07	(15%)

*These are non-GAAP financial measures.  The reconciliation between GAAP and non-GAAP measures is provided in the tables following this news release, as well as on the company’s investor relations website.

“This past year was a very successful one for Corning,” Wendell P. Weeks, chairman, chief executive officer, and president, said. “We had the strongest annual sales performance in our 161-year history. We set new records for gross margin and operating income* (before special items). The company generated positive free cash flow* for the eighth consecutive year. We have a healthy balance sheet, and we raised our shareholder dividend and initiated a share repurchase program.

“Four of our business segments – Telecommunications, Environmental Technologies, Life Sciences, and Specialty Materials – had excellent performance in 2011. The aggregate sales and net income* (before special items) of these segments grew 31% and 136% respectively.  Sales of Corning® Gorilla® Glass almost tripled. Our innovation investments paid off with the introduction of Corning Lotus™ Glass for OLED displays and a new, improved cover glass, Corning® Gorilla® Glass 2. Our outstanding performance came despite the less-than-robust growth in economies around the world.”

Weeks pointed out that 2011 was not without its challenges. “In the fourth quarter, we experienced significant LCD glass price declines due to a confluence of factors in the display market. And our equity venture, Dow Corning Corporation, experienced major upheaval in the solar panel industry with lower demand and pricing of polysilicon materials. These price declines will reset the profitability of both Display Technologies and Dow Corning to lower levels.”

He added, “It is important to remember the strengths of these businesses. Dow Corning has the lowest cost and leading market position in the polysilicon industry. Corning’s LCD business, which remains very profitable, has the lowest cost and the leading market position in the industry. It should continue to generate significant cash in the future.”

Fourth-Quarter Segments Results
Sales in the Display Technologies segment were $780 million, a decline of 4% sequentially, but a 4% increase compared to a year ago. Glass price declines at both the wholly owned business and SCP were significant.

Telecommunications segment sales were $490 million, a decline of 13% sequentially and in line with the company’s expectations. On a year-over-year basis, sales increased 11%.

Environmental Technologies segment sales were $234 million, a 5% quarter-over-quarter decline and basically even with last year’s fourth-quarter results.

Specialty Materials segment sales were $238 million, a 20% sequential decline and in line with Corning’s expectations. Compared to last year, sales increased 21%.

Life Sciences segment sales were $143 million, a 7% sequential decline and a 2% year-over-year gain.

Corning’s equity earnings were $321 million and included a one-time gain of $89 million.

Corning ended the year with more than $5.8 billion in cash and short-term investments. Capital spending for the year was $2.4 billion, in line with the company’s expectations.

Looking Forward
“The display industry is in a period of transition and we are in the process of resetting expectations for its future growth and profitability,” James B. Flaws, vice chairman and chief financial officer, remarked. “We are working closely with our customers to reduce glass prices to help them with their immediate financial strains. To that end, price declines will be significant in the first quarter of 2012, as they were in last year’s fourth quarter. We expect significant double-digit price declines over the cumulative two-quarter period. We are hopeful that our pricing actions, combined with our capacity decisions, will help us get back to more stable price declines in the coming quarters.

“We believe the actions we have taken to reduce capacity have brought LCD glass supply closer to end market demand. If we correctly estimated retail demand and supply chain dynamics, then we believe worldwide glass supply will become balanced with glass demand at some point during the year. We will be cautious on pace and timing of bringing capacity back on line,” Flaws said.

Corning is not anticipating much sequential change in the overall glass market in the first quarter. Volume at its wholly owned business should be in line with the glass market. At SCP, volume is expected to be flat to down in the double digits, depending upon the outcome of negotiations with a key customer.

The company expects the retail market for LCD products to grow from about 3.2 billion square feet to 3.6 billion square feet in 2012. “This represents the amount of glass contained in LCD-based products sold to consumers, not the amount of glass shipped from glass makers to panel makers. The amount of glass shipped will be dependent upon panel maker utilization rates and supply chain dynamics,” he explained.

In the company’s Telecommunications segment, Corning is forecasting that demand for its fiber-to-the-home, enterprise networks, and wireless products will remain strong worldwide. “For the full year, we expect our telecom sales to be up significantly,” Flaws said. In the first quarter, sales are expected to increase between 5% and 10% sequentially and year over year.

Environmental Technologies segment sales are expected to grow in 2012, driven primarily by the global demand for the company’s diesel emissions products. In the first quarter of this year, sales are expected to increase slightly.

Specialty Materials segment sales will be led by Corning Gorilla Glass. The company anticipates significant growth at retail for devices with cover glass, driven primarily by tablet computers and handheld IT devices. Flaws said, “We do expect further yield improvements at our customers, as well as some price declines, this year. These will impact our sales growth.”  In the first quarter, segment sales are anticipated to be up slightly.

In the Life Sciences segment, Corning expects another strong year of sales, through a combination of organic growth and acquisitions. For the first quarter, sales are expected to increase 10% sequentially, driven primarily by the acquisition of Mediatech, Inc., which occurred late in fourth quarter of 2011.

Equity earnings in the first quarter are expected to decline in the range of 5% to 20%, excluding special items, due to lower earnings at both Dow Corning and Samsung Corning Precision Materials.

Corning’s tax rate is likely to increase to 20% in the first quarter and the full year, as expected.

Flaws remarked, “We believe Corning is approaching a new floor in terms of profitability due to transitions in our LCD business and Dow Corning’s polysilicon business. Moving forward, our plan is to grow profits from this new level.”

“To that extent,” Flaws said, “we anticipate strong sales and profit growth over the next several years in our Telecommunications, Environmental Technologies, Specialty Materials, and Life Sciences segments.” Sales in the company’s Display Technologies segment are not expected to grow, but the segment is expected to produce significant profits and cash going forward.

“Overall, we anticipate generating strong free cash flow* over the next several years. We plan to use the cash for acquisitions to supplement growth, dividend payments, and our share repurchase program.

“At Corning, we are not threatened by business transitions. We have faced many in the past and weathered them successfully. We believe our business portfolio is strong, we have a leading competitive position in each market, and our innovation investments will generate future growth,” Flaws said.

The company will provide additional details on its first-quarter and full-year outlook at its annual investor meeting in New York on Feb. 3.

Upcoming Events
Corning will host investors and provide more information on its 2012 outlook at its annual investor meeting in New York on Friday, Feb. 3 beginning at 8 a.m. ET at Cipriani on 42nd Street. Corning will showcase products and technologies prior to and following the formal meeting at 9 a.m. ET. The company’s exhibits, including hands-on Gorilla Glass product demonstrations, will be available for viewing and senior management will also be available during the exhibit periods to answer individual investor questions. Attendees can register online at the company’s investor relations website.

Corning will also be presenting at the Goldman Sachs Technology and Internet Conference Feb. 14 and the Morgan Stanley Media and Telecom Conference Feb. 28, both in San Francisco.

Corning Incorporated (Corning), incorporated in December 1936, is a technology-based company. The Company operates five business segments: Display Technologies, Telecommunications, Environmental Technologies, Specialty Materials and Life Sciences. Corning manufactures and processes products at approximately 60 plants in 13 countries. In October 2010, the Company acquired Plaslab S.A.S. On October 1, 2010, the Company acquired 49% interest in Quebec Silicon Limited Partnership (Quebec Silicon LP), which is a silicon metal manufacturing company with operations in Canada. In March 2011, the Company acquired all outstanding shares from the shareholders of MobileAccess. In December 2011, it acquired Mediatech, Inc.

Display Technologies Segment

Corning’s Display Technologies segment manufactures glass substrates for matrix liquid crystal displays (LCDs), that are used primarily in notebook computers, flat panel desktop monitors, and LCD televisions. Corning’s facilities in Kentucky, Japan, Taiwan, and China and those of Samsung Corning Precision Materials Co., Ltd. (Samsung Corning Precision), in which it owns 50%, in Korea develop, manufacture and supply glass substrates. Samsung Corning Precision sells LCD glass to panel manufacturers in Korea, while panel manufacturers located in Japan, Taiwan, Singapore and China and other LCD-producing areas of the world are supplied by Corning. Glass substrates are available from Corning in sizes up to Generation 10 (2,850mm x 3,050 millimeter). In 2010, the Company introduced EAGLE XG Slim glass, a new line of slim glass substrates, which enables lighter-weight portable devices and thinner televisions and monitors. During the year ended December 31, 2010, the Display Technologies segment represented 45% of Corning’s sales.

The Company competes with Asahi Glass, Nippon Electric Glass and Avan Strate, Inc., formerly NH Techno.

Telecommunications Segment

The Telecommunications segment produces optical fiber and cable, and hardware and equipment products for the worldwide telecommunications industry. Corning offers a range of optical fiber technology products and enhancements for a range of applications, including premises, fiber-to-the-home access, metropolitan, long-haul and submarine networks. Corning makes and sells InfiniCor fibers for local area networks, data centers and central offices; SMF-28e+ single-mode optical fiber that provides additional transmission wavelengths in metropolitan and access networks; SMF-28 ULL fiber, and LEAF optical fiber for long-haul, regional and metropolitan networks. It also offers ClearCurve ultra-bendable single-mode fiber for use in multiple dwelling units and fiber-to-the-home applications; ClearCurve ultra-bendable multimode fiber for data centers and other enterprise networks, and Vascade submarine optical fibers for use in submarine networks. Corning has two optical fiber manufacturing facilities in North Carolina and China.

A portion of Corning’s optical fiber is sold to subsidiaries, such as Corning Cable Systems LLC, Beijing CCS Optical Fiber Cable Co., Ltd., Chengdu CCS Optical Fiber Cable Co., Ltd. and Corning Cable Systems Polska Sp. Z o.o. Its hardware and equipment products include cable assemblies, fiber optic hardware, fiber optic connectors, optical components and couplers, closures and pedestals, splice and test equipment and other accessories for optical connectivity. For copper connectivity, Corning’s products include subscriber demarcation, connection and protection devices, xDSL (different variations of digital subscriber lines) solutions and outside plant enclosures. In addition, Corning offers products for the cable television industry, including coaxial connectors and associated tools. During 2010, the Telecommunications segment represented 26% of Corning’s sales.

The Company competes with Furukawa Electric/OFS, Fujikura Ltd., Sumitomo Electric, Prysmian Cables & Systems, Draka Comteq, 3M Company (3M), Tyco Electronics, Furukawa OFS and CommScope.

Environmental Technologies Segment

Corning’s Environmental Technologies segment manufactures ceramic substrates and filter products for emissions control in mobile and stationary applications around the world. Corning develops ceramic substrate and filter products for gasoline and diesel applications. The Company manufactures substrate and filter products in New York, Virginia, China, Germany and South Africa. Corning sells its ceramic substrate and filter products worldwide to manufacturers of emission control systems who then sell to automotive and diesel vehicle or engine manufacturers. During 2010, the Environmental Technologies segment represented 12% of Corning’s sales.

The Company competes with NGK, Denso and Ibiden.

Specialty Materials Segment

The Specialty Materials segment manufactures products that provide more than 150 material formulations for glass, glass ceramics and fluoride crystals. This segment operates in markets, including display optics and components, semiconductor optics components, aerospace and defense, astronomy, ophthalmic products, telecommunications components, and protective cover glass for portable display devices and televisions. Semiconductor optics manufactured by Corning includes optical material products, optical-based metrology instruments and optical assemblies for applications in the semiconductor industry. Corning’s semiconductor optics products are manufactured in New York. Its protective cover glass, the Corning and Gorilla glass, is a cover glass for display devices, such as notebook personal computers (PCs), televisions and mobile phones. Corning Gorilla glass is manufactured in Kentucky, Japan and Taiwan. Other specialty glass products include glass lens and window components and assemblies. During 2010, the Specialty Materials segment represented approximately 9% of Corning’s sales.

The Company competes with Schott, Shin-Etsu Quartz Products, Asahi Fine Glass, Carl Zeiss, Nikon, NEG, Transitions Optical, Oerlikon, Hoya and Heraeus.

Life Sciences Segment

The Company is a developer, manufacturer and a global supplier of scientific laboratory products. Life Sciences laboratory products include general labware and equipment, as well as tools for cell culture and bioprocess, genomics and proteomics, and high-throughput screening. Corning manufactures these products in Maine, New York, New Jersey, California, Utah, Mexico, France, Poland and China. The products are marketed worldwide, primarily through distributors, to pharmaceutical and biotechnology companies, academic institutions, hospitals, government entities and other research facilities. Corning developes and produces technologies, which includes the Corning HYPERFlask Cell Culture Vessel for cell yields, and surfaces, which includes the Corning CellBIND Surface and the Corning Osteo-Assay surface. During 2010, the Life Sciences segment represented approximately 8% of Corning’s sales.

The Company competes with Greiner, Becton Dickinson, Kimble-Chase and Duran.

All Other

The Company’s Other products include development projects and new product lines, corporate investments, Samsung Corning Precision’s non-LCD business, and Corning’s Eurokera and Keraglass equity affiliates with Saint Gobain Vitrage S.A. of France, which manufacture smooth cooktop glass/ceramic products in France, China, and South Carolina. Development projects and new product lines include the use of various technologies for new products, such as flow reactors, thin-film photovoltaics and for thin, strong glass applications. The Epic system, which is a screening platform-based on optical biosensor technology, offers drug developers to evaluate new drug targets through both biochemical and cell-based drug discovery applications. During 2010, All Other products represented less than 1% of Corning’s sales.

Shayne Heffernan

Shayne Heffernan oversees the management of funds for institutions and high net worth individuals.

Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services. www.livetradingnews.com

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Posted by Shayne Heffernan on Jan 26th, 2012and filed underEquities, Latest News, Shayne Heffernan, USA.You can follow any responses to this entry through theRSS 2.0Responses are currently closed, but you can trackback from your own site.