Corning – Quick Take
Corning (GLW) reported 1Q results of $3.3b and EPS of $0.67, with core (non-GAAP) EPS of $0.45, ahead of the $3.1b and $0.43 (non-GAAP) consensus estimates. While the company saw strength in sales and net income (y/y) from all divisions, the company saw an increase in freight and logistics costs that reduced profitability by $50m which they believe will be reduced in 2Q and beyond. The display segment saw a 3% increase in sales (q/q) for 1Q, which has seen negative 1Q q/q results since 2015, so increased utilization at large panel producers has certainly had a positive effect on that segment. However, references to y/y growth for display (up 15%), are against the onset of COVID-19 last year and have less relevance. Specialty Materials, the segment that produces Corning’s cover glass products, saw a 17% q/q decline in sales (up 28% y/y), which was a bit better than typical 1Q (q/q) performance over the last few years.
We believe that the tightness of the glass market, in part due to capacity events at competitors, and Corning’s previous comments concerning a glass price increase, might have driven perceptions above reality, and while Corning is in a very advantageous position in terms of demand and pricing, they do face some of the same issues relating to cost and shortages that others inI the industry also face. Some are direct and some are indirect, but we expect that some investors have assumed that Corning has stayed outside of such issues and will remain so. While we reiterate that much of Corning’s display related business is seeing positive conditions, that enthusiasm should be tempered by the possibility of component shortages putting caps on display space performance. Corning has the edge in large panel TV substrate supply, but if panel producers cannot produce due to driver or other component shortages in 2Q, it could mitigate some of that advantage. It’s hard not to be enthusiastic when the metrics are positive, but “The enlightened ruler is headful, and the good general is full of caution.” - Sun Tzu
We believe that the tightness of the glass market, in part due to capacity events at competitors, and Corning’s previous comments concerning a glass price increase, might have driven perceptions above reality, and while Corning is in a very advantageous position in terms of demand and pricing, they do face some of the same issues relating to cost and shortages that others inI the industry also face. Some are direct and some are indirect, but we expect that some investors have assumed that Corning has stayed outside of such issues and will remain so. While we reiterate that much of Corning’s display related business is seeing positive conditions, that enthusiasm should be tempered by the possibility of component shortages putting caps on display space performance. Corning has the edge in large panel TV substrate supply, but if panel producers cannot produce due to driver or other component shortages in 2Q, it could mitigate some of that advantage. It’s hard not to be enthusiastic when the metrics are positive, but “The enlightened ruler is headful, and the good general is full of caution.” - Sun Tzu
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