Foolish Forecast: Corning Glows Brightly

All through 2006, and into Q1 of this year, analysts have watched in astonishment as LCD TV glass-maker Corning (NYSE: GLW) beat their estimates time and time again. Will Wednesday's results be as picture-perfect?

What analysts say:

• Buy, sell, or waffle? Fifteen analysts give Corning 13 buy ratings and a pair of holds.
• Revenue. On average, they're looking for 14% sales growth, to $1.44 billion.
• Earnings. Profits are predicted to rise 23% to $0.32 per share.

What management says:
If you've any doubt about whether Corning's news tomorrow will be good, a quick read of Thursday's press release should dispel it. Citing his five-year plan to "return Corning to profitability, protect the financial health of the company and continue to invest in our long-term future," CEO Wendell Weeks pronounced the mission, if not "accomplished," then at least significantly progressed.

So much progressed, in fact, that Corning felt confident enough to begin returning considerable loot to its owners. The board initiated a $0.05-per-share quarterly dividend that will pay out about $320 million over the course of the next year (more, if increased), and authorized the purchase of half a billion dollars' worth of stock over the next 18 months. A few taps on your calculator keys should reveal that this all adds up to about $1 billion headed back to shareholders over the next year and a half.

What management does:
If all of that seems a bit generous, don't worry -- Corning can afford it. Its gross margins remain rock solid and unchanged (on a rolling basis) for three quarters straight. Meanwhile, operating margins continue to climb -- significantly higher than those of rivals such as 3M (NYSE: MMM) and Becton Dickinson (NYSE: BDX) -- and net margins are still soaring.

Margins	12/05	3/06	6/06	9/06	12/06	3/07
Gross	43.3%	44.4%	44.5%	44.1%	44.1%	44.1%
Operating	30.8%	32.4%	33.7%	36%	38.4%	38.8%
Net	12.8%	12.4%	19.2%	23.5%	35.9%	36.9%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
But wait -- I've saved the best news for last. Regular readers of the Fool will recall that as much as I love Corning as a business (enough to make the CEO one of my very first Fool interviewees), I've had serious reservations about Corning as an investment, because the firm's heavy capital investment program leaves so little cash flow left over as "free cash flow."

Well, hold on to your flat screens, because that may be about to change. Having paid off nearly two-thirds of its debt over the last four years, and "generated significant operating cash flow in excess of capital expenditures in each of the last four years," Weeks says he is confident that Corning will "continue to generate positive free cash flow in the future." Going forward, we'll want to monitor whether that positive free cash flow more resembles a torrent, or a trickle.

Track Corning's progress in recent quarters here:

• Corning Crows: Fool by Numbers
• Corning Shines: Fool by Numbers
• Corning Looks Up Q3: Fool by Numbers

Did you miss our interview with Wendell Weeks? Catch it now, in two bite-size segments:

• Corning on the Cutting Edge
• Corning on the Cutting Edge, Part 2

3M is an Inside Value recommendation.

Fool contributor Rich Smith does not own shares of any company named above.