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Earnings slide lower than they have in years, despite sales growth.
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Despite matching its own tamped-down expectations this morning, Corning (NYSE: GLW) still earned a thumbs-down from the market. The glassmaker had an impossible act to follow after Apple (Nasdaq: AAPL) posted the mother of all earnings beats yesterday. Company executives offered (very) tentatively hopeful notes in its press release -- but since Corning delayed revealing its detailed 2012 outlook until Feb. 3, investors will have to wait to see if the company's dented bottom line can pop back up.
Just the facts, ma'am
Though Corning bested analyst's revenue estimates, its profitability took a hit over the past year, to say nothing of the past quarter. Over the past few quarters, revenue and profit have begun to diverge.
While the company has had sequential declines before, the longer-term trend has not been good. Corning still boasts an enviable net margin, but at 26%, it's at its lowest level in over two years. Here's what's causing the changes:
A few bright spots
Corning CFO James B. Flaws foresees the company's profit slide bottoming out in the near future as the two underperforming segments mentioned above transition towards more successful strategies. In order to improve its profitability, though, Corning is going to have to tamp down its production capacity by 25% to cope with oversupply problems. Lowered guidance isn't a new trend either, as fellow Fool John Grgurich mentions in the previously linked article. However, Anand Chokkavelu notes that Corning's long-term picture looks bright, with $7 billion in free cash flow expected by 2014.
By most measures, Corning's stock is still quite cheap, but booming demand for Gorilla-Glassed iStuff hasn't yet boosted the bottom line. If profitability continues to slide, investors might want to start wondering if Corning's still a deep-value play, or if Admiral Ackbar's immortal words are closer to the truth: "It's a [value] trap!"
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