Will Corning Earnings Support Its Turnaround?

Corning (NYSE: GLW  ) will release its quarterly report on Tuesday. The maker of Gorilla Glass for smartphones and other mobile devices has seen its stock bounce back somewhat after substantial declines during 2011 and 2012, but in order for the company's recovery to continue, investors will want to see growth in Corning earnings, and it's far from clear whether the glassmaker can deliver on those wishes.

For Corning, the most important thing to remember is that when it comes to sales and profits, size matters. As big an opportunity as mobile devices present for the company, the fundamental problem is that smartphones are small. As a result, Corning relies a lot more on big products like large-screen TVs, whose sales have been disappointing lately. Let's take an early look at what's been happening with Corning over the past quarter and what we're likely to see in its report.

Stats on Corning

Analyst EPS Estimate

$0.31

Change From Year-Ago EPS

0%

Revenue Estimate

$1.97 billion

Change From Year-Ago Revenue

3.3%

Earnings Beats in Past 4 Quarters

3

Source: Yahoo! Finance.

What can make Corning earnings grow in the future?
In recent months, analysts have gotten a bit more optimistic about where Corning earnings are headed, boosting June-quarter estimates by $0.01 per share and making similarly modest increases to 2013 and 2014 full-year views. The stock has also responded favorably, rising 17% since late April.

Much of Corning's gains came right after the company announced its first-quarter earnings. In that report, the company presented mixed past results, managing to be much more profitable than analysts had expected despite posting revenue figures that fell well short of expectations. But more important was Corning's favorable guidance, in which it projected greater stability from its important LCD glass business as price declines start to slow. Meanwhile, a pick-up in fiber-optic demand from telecom customers and boosts in Gorilla Glass and life-sciences-related sales should provide revenue growth going forward, even as its Dow Corning joint venture with Dow Chemical (NYSE: DOW  ) faced some pressures from high materials costs and oversupply.

Yet given the size of the smartphone market, Corning has to deal with potential threats to the success of Gorilla Glass. With academic articles pointing to the possibility of using sapphire-based materials to replace glass in smartphones, sapphire-maker GT Advanced Technologies (NASDAQ: GTAT  ) could pose a long-term challenge to Corning, especially if it can manage to find ways to create alternative materials in a cost-effective manner. So far, though, Corning believes its latest Gorilla Glass 3 version is superior to any sapphire-based material currently available. More importantly, key customer Apple (NASDAQ: AAPL  ) agrees, having chosen to stick with Gorilla Glass for the foreseeable future after reportedly considering sapphire alternatives to go beyond its current use for the cover of the iPhone's camera lens.

One interesting area for potential growth focuses on Corning's new partnership with a company called View that makes what it calls dynamic glass. With the material automatically adjusting to the surrounding environment and allowing for external control as well, dynamic glass can cut back on how much heat enters buildings that use the product and therefore produce huge cuts in energy costs.

In the Corning earnings report, pay attention not only to the tech-based products like Gorilla Glass but also to the less-followed business lines like the Dow Corning venture. If Corning can help reverse adverse trends at the venture, then it could help contribute to better growth prospects in the future.

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