Foolish Forecast: Cornering Corning

All through 2006, and all through this year so far, analysts have gazed spellbound as LCD TV glassmaker Corning (NYSE: GLW) beat their estimates over and over again. Will it be a repeat airing tomorrow, or might this series be canceled?

What analysts say:

• Buy, sell, or waffle? Eighteen analysts give Corning 16 buy ratings and a pair of holds.
• Revenue. On average, they're looking for 21% sales growth to $1.55 billion.
• Earnings. Profits are predicted to rise 32% to $0.37 per share.

What management says:
Color CEO Wendell Weeks "delighted" with how things worked out for Corning last quarter (although Mr. Market was less so). Results were "strong" at the display technologies unit, which makes glass used to make panels by firms like AU Optronics (NYSE: AUO) and LG.Philips LCD (NYSE: LPL). The panels are then incorporated into LCD TVs by firms like Philips (NYSE: PHG) and Sony (NYSE: SNE), and the TVs ultimately wind up on the shelves at Best Buy (NYSE: BBY) and Circuit City (NYSE: CC). Less than delightful was the telecommunications business, where sales were "softer than we expected."

A few weeks later, Corning updated investors on how the quarter was progressing, saying that sales would likely end up ... well, just about at the number the analysts dutifully cribbed, noted in the section above. (Where the problem may be is in earnings. Analysts want to see $0.37. All Weeks promised was a range from $0.34 up to $0.37.)

What management does:
Of course, it's entirely possible that Corning will earn the full $0.37 (or more). Gross margins rose strongly last quarter, while operating margins have climbed steadily for nearly a year now.

Margins	3/06	6/06	9/06	12/06	3/07	6/07
Gross	44.4%	44.5%	44.1%	44.1%	44.1%	45.0%
Operating	17.8%	18.0%	17.1%	17.4%	17.6%	18.5%
Net	12.4%	19.2%	23.5%	35.9%	36.9%	35.3%

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:
And the net margin? Don't worry too much about that, Fool. Thanks to the vagaries of GAAP accounting, Corning's net bounces around a lot -- even more than most, thanks to its stock contribution to the asbestos litigation settlement fund. Whenever the stock price goes up, the value of the contribution to the fund increases -- hurting net earnings as defined by GAAP. Whenever Corning's stock price slides, the opposite effect takes hold. There's nothing to be done about this but grin and bear the volatility (and take advantage of it, if the opportunity presents itself).

What did we expect from Corning last quarter, and what did we get? Find out in:

• Mr. Market Smears Corning
• Foolish Forecast: Corning Glows Brightly