Corning Fires on (Almost) Every Cylinder

IMAGE SOURCE: CORNING INCORPORATED.

Corning Incorporated (GLW -0.64%) may have revealed weaker-than-expected first-quarter 2016 results on Tuesday. But even with shares down more than 8% as the market recoiled, that doesn't mean investors should be dissatisfied with the glass technology specialist's performance.

Let's take a closer look at what Corning achieved in its latest quarter:

Corning results: The raw numbers

DATA SOURCE: CORNING INCORPORATED. 

What happened with Corning this quarter? 

• Generated adjusted operating cash flow of $110 million.
• Continue to expect full-year operating cash flow to be roughly consistent with 2015, when operating cash flow came in at $3.2 billion.
• Completed a $1.25 billion accelerated stock repurchase program in January, then subsequently repurchased an additional $751 million in shares.
• Ended the quarter with $3.5 billion in cash, $1.1 billion of which is in the United States.
• Gross margin was 41%, in line with expectations.
• Display Technologies segment revenue fell 14.7% year over year, to $829 million, while Display net income fell 24.1%, to to $223 million, both in line with expectations.
• Experienced continued moderation in LCD glass price declines, including the smallest sequential first-quarter decline in five years. 
• Finalized LCD glass supply agreements for the remainder of 2016.
• Optical Communications segment sales fell 12.6% year over year, to $609 million, below expectations. Optical net income fell 64%, to $26 million, due to both lower sales volume and costs associated with implementation issues with new manufacturing software.
• Environmental Technologies sales fell 6% year over year, to $264 million. But that's also better than the 10% decline management anticipated due to strong demand for light duty substrates in North America and China. Environmental net income fell 22.9%, to $37 million, in line with expectations.
• Specialty Materials sales dropped 16.5% to $227 million, as last year's first quarter volume benefited from a supply chain as it was building, where 2016 production ramps aren't expected until later in the year. Specialty Materials' core net income dropped 30.4%, to $32 million.
• Life Sciences revenue rose 3.6%, to $204 million, and core earnings fell 5.3, to $18 million, both in line with expectations. 
• Dow Corning Corporation core equity earnings climbed 13.7%, to $58 million, well above expectations for $45 million.
• Recall last quarter Corning announced a tax free "realignment" of its 50% interest in Dow Corning, where it will form a new entity wholly owned by Corning, as well as hold 40% ownership in Hemlock Semiconductor and $4.8 billion in cash. This transaction is expected to close by June.

What management had to say 
As Corning CEO Wendell Weeks said:

We are pleased that we were able to meet overall profit expectations in the first quarter despite the impact from a manufacturing software implementation issue. We expect strong sequential core sales and profit growth in the second quarter. We are also making great progress on our four-year plan to grow, return cash to our shareholders, and create significant value.

Regarding Corning's four-year plan, recall late last year the company outlined a goal of returning more than $10 billion to shareholders through dividends and repurchases, and to invest $10 billion in research, development, and engineering through 2019. 

Keeping in mind Corning has never been one to bend to Wall Street's quarterly demands, this was a solid quarter in which sales from Display, Environmental, Specialty Materials, and Life Sciences each met or exceeded expectations. And Optical only fell short because of a temporary issue that has since largely been resolved. Considering management already told investors to expect the first quarter to be Corning's weakest from a financial standpoint, I think long-term investors have no need to worry today.