Will Top-Line Decline Hurt Corning's (GLW) Q3 Earnings?

Corning Incorporated (NYSE:GLW) is scheduled to report third-quarter 2019 results on Oct 29, before the opening bell. In the last reported quarter, the company delivered positive earnings surprise of 2.3%. Markedly, Corning topped the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average beat being 3.7%.

The specialty glass maker is likely to report lower total revenues on a year-over-year basis in the quarter under review. Corning has already communicated its reduced expectations for two business segments — Display Technologies and Optical Communications — while maintaining guidance for its other three segments for the to-be-reported quarter.

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

Factors to Consider

Within the Display Technologies segment, Corning reduced its volume expectations for the third quarter and anticipates sales to be down by high single-digit percentage on a sequential basis. The soft sales projections are primarily based on lower-than-expected utilization levels by several panel manufacturing customers due to conservative buying patterns of set makers.

In the Optical Communications segment, third-quarter sales are projected to be down by a low-teen percentage compared with the prior expectation of a low single-digit percentage decline year over year. This is largely attributable to lower capital spending by several major carriers on cable deployments and fiber-to-the-home projects.

During the September quarter, Corning’s Astra Glass was selected by Chengdu CEC Panda Display Technology Co., Ltd. (CCPD) — a leading Chinese oxide panel maker — for its line of oxide-TFT LCD panels used mainly for high-performance, large-size TVs and monitors. In fact, Corning was designated as a major display glass supplier for CCPD’s Oxide-LCD panels. This is likely to have benefited the company’s performance.

The Zacks Consensus Estimate for net sales from the Optical Communications segment, which accounts for the lion’s share of total revenues, is currently pegged at $976 million. It reported $1,117 million a year ago. Net sales from Display Technologies are expected to be $744 million. It reported $852 million in the year-ago quarter.

Net sales from Specialty Materials are estimated to be $461 million. The same was $459 million reported a year ago. While net sales from the Environmental Technologies segment are expected to increase to $373 million from $331 million, the same from Life Sciences are projected to grow to $245 million from $231 million.

For the third quarter, the Zacks Consensus Estimate for total revenues stands at $2,893 million. It reported $3,045 million in the year-earlier quarter. Consequently, adjusted earnings per share are pegged at 40 cents. The same was 51 cents reported a year ago.

What Our Model Says

Our proven model doesn’t conclusively predict an earnings beat for Corning this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances 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 0.00% as both are pegged at 40 cents.

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

Corning Incorporated Price and EPS Surprise