Will Lower Revenues Dampen Corning's (GLW) Q4 Earnings?

Corning Incorporated (NYSE:GLW) is scheduled to report fourth-quarter 2019 results on Jan 29, before the opening bell. In the last reported quarter, the company delivered a positive earnings surprise of 10%. Notably, Corning topped the Zacks Consensus Estimate for earnings in the trailing four quarters, the beat being 4.6%, on average.

The specialty glass maker is expected to have recorded lower aggregate revenues on a year-over-year basis. On Sep 16, 2019, Corning communicated its reduced expectations for two business segments, Optical Communications and Display Technologies, while maintaining guidance in its other three segments for the second half of 2019.

Let’s find out how things have shaped up prior to the announcement.

Factors at Play

While taking actions to offset headwinds, Corning is confident in its ability and continues to advance long-term growth initiatives. It is likely to have benefited from measures to reduce operating expenses, align capacity to demand in Display Technologies, and speed up capital projects in Optical Communications in the quarter under review.

An additional $250 million investment from Apple (NASDAQ:AAPL) in Corning’s advanced manufacturing and the FDA approval of Valor Glass packaging for its first commercial use have aided the company’s performance. It also collaborated with Intel (NASDAQ:INTC) to accelerate the availability of 5G in buildings.

The Zacks Consensus Estimate for net sales from the Optical Communications segment, which accounts for the lion’s share of total revenues, is pegged at $908 million, indicating a 22.1% decline from the year-ago reported figure. This decline suggests weakness in overall market due to customers’ project spending decisions, mainly in carrier networks. Net sales from Display Technologies are anticipated to be $726 million, indicating a 19.2% decline from the prior-year recorded figure, owing to lower glass volume and prices.

Net sales from Specialty Materials are estimated to be $400 million. The same was $399 million a year ago. Net sales from Environmental Technologies are expected to increase to $356 million from $319 million, backed by adoption of gasoline particulate filters and solid demand in the heavy-duty market. Net sales from Life Sciences are projected to rise to $252 million from $238 million.

For the December quarter, the Zacks Consensus Estimate for aggregate revenues stands at $2,680 million, suggesting a 13% decline from the prior-year recorded figure. Consequently, adjusted earnings per share are pegged at 44 cents, indicating a decline from earnings of 59 cents reported a year ago.

What Our Model Says

Our proven model doesn’t conclusively predict an earnings beat for Corning this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Corning’s Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -0.38%.

Corning Incorporated Price and EPS Surprise

Zacks Rank: Corning currently has a Zacks Rank #4 (Sell).

Stocks to Consider

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

SEI Investments Company (NASDAQ:SEIC) is slated to release quarterly results on Jan 29. It has an Earnings ESP of +2.35% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) is scheduled to release results on Jan 30. The company has an Earnings ESP of +5.97% and sports a Zacks Rank #1.

Microchip Technology Incorporated (NASDAQ:MCHP) has an Earnings ESP of +1.33% and sports a Zacks Rank of 1. The company is set to report results on Feb 4.

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