Corning (GLW) Exceeds Second Quarter Earnings Estimates, Lacks Revenue – July 26, 2022

Corning Incorporated (GLW Free Report) reported mixed results in the second quarter of 2022, in which net income exceeded the Zacks consensus estimate, but the top result missed the same. The company updated its guidance based on the challenging macro environment. Stocks mostly trended lower in premarket trading on the lackluster outlook, with investors likely expecting healthy growth momentum.

Net revenue

On a GAAP basis, net income for the quarter was $563 million or 66 cents per share, compared to $449 million or a loss of 42 cents per share in the year-ago quarter. Basic net income increased to $489 million or 57 cents per share from $459 million or 53 cents per share in the year-ago quarter. The net result beat Zacks’ consensus estimate by a penny.

Revenue

Quarterly GAAP net sales increased 3.3% year-over-year to $3,615 million, driven by strong growth in Hemlock’s optical communications and solar materials. Base sales increased from $3,504 million to $3,762 million. The top line missed the consensus estimate of $3.779 million.

Sector results

Net sales in Optical Communications rose 22.1% year-over-year to $1,313 million as network operators increased capital spending to meet demand for 5G, broadband and cloud. The segment’s contribution to net income was $182 million, compared to $148 million in the prior year quarter, driven by strong volume and price increases.

Net sales in Display technology were $878 million compared to $939 million in the prior year quarter, due to lower volume and lower panel maker utilization. Net income for the segment was $228 million, compared to $248 million in the year-ago quarter.

Specialty Materials‘Net sales were relatively flat year-over-year at $485 million. The company is seeing significant demand for its premium cover materials and advanced optics products, supported by strength in the computing, mobile device and semiconductor markets. Net income for the segment was $91 million, compared to $81 million a year ago.

Environmental technologiesNet sales fell 12.5% ​​year-over-year to $356 million as component shortages limited auto production. The protracted war between Russia and Ukraine and new COVID-19 related lockdown restrictions in China also affected segment sales. Net income for the segment was $62 million, compared to $81 million in the prior quarter.

Net sales in Life sciences were flat year-over-year at $312 million as lower demand for COVID-related products was offset by growth in research and biomanufacturing. Net income for the segment decreased to $37 million from $52 million a year ago. The decline is due to COVID-related lockdown restrictions in China, which negatively impacted production.

In Hemlock and Emerging Growth Companies, net sales increased 45.1% year over year to $418 million. Demand for Hemlock’s solar materials increased while sales of semiconductor materials remained strong. Automotive Glass Solutions and Corning Pharmaceutical Technologies also contributed to the growth. The segment’s net profit was $25 million compared to a net loss of $15 million a year ago.

Other details

Cost of sales increased 8.4% year over year to $2,369 million. Gross profit decreased to $1,246 million from $1,315 million. Operating profit was $490 million, compared to $575 million a year ago.

Cash flow and liquidity

During the second quarter of 2022, Corning generated $758 million of cash from operating activities, compared to $771 million in the prior year quarter, bringing the respective counts for the first half to $1,292 million and $1,494 million. Free cash flow decreased to $440 million in the quarter from $471 million a year earlier.

As of June 30, 2022, the company had $1,629 million in cash and cash equivalents with $6,677 million in long-term debt.

Outlook

Corning expects macroeconomic challenges to continue to impact its third-quarter sales. For the third quarter, the company expects base sales in the range of $3.65 billion to $3.85 billion with basic earnings per share of 51 cents to 55 cents. For the full year, management expects sales to be just over $15 billion, with sales growth of 6-8% year-over-year and EPS in line with sales.

Zacks Ranking and Stocks to Consider

Corning currently carries a Zacks rank #4 (sell). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

TESSCO Technologies Incorporated (TESS Free Report), carrying a Zacks Rank #2 (Buy), has generated a profit surprise of 61.9%, on average, over the past four quarters. TESSCO’s profit estimates for the current year have risen 35.4% since July 2021.

TESSCO offers products to the industry’s leading manufacturers in the fields of mobile communications, Wi-Fi, wireless backhaul and related products. With over three decades of experience, it provides complete end-to-end solutions to the wireless industry.

Ooma Inc. (OOMA Free Report), carrying a Zacks rank of No. 2, has generated a profit surprise of 34.7%, on average, over the past four quarters. TESSCO’s profit estimates for the current year have increased by 11.4% since July 2021.

Ooma provides communications services and related technologies for businesses and consumers in the United States and Canada. It helps create powerful connected experiences for businesses and consumers through its intelligent, cloud-based SaaS platform.

Harmonic Inc. (HLIT Free Report), carrying a Zacks rank of No. 2, has generated a profit surprise of 79.8%, on average, over the past four quarters. TESSCO’s profit estimates for the current year have risen 35.4% since July 2021.

Harmonic provides software, products, system solutions and video streaming services worldwide. With more than three decades of experience, it has revolutionized cable access networks through the industry’s first virtualized cable access solution, enabling cable operators to more flexibly deploy gigabit Internet service in consumers’ homes and mobile devices.

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