Foolish Forecast: Corning's Conundrum

LCD TV glassmaker Corning (NYSE: GLW  ) reports its fiscal Q4 and full-year 2008 earnings news early next week. Want to know what Wall Street expects to see? Read on. Want to know what really matters? Read on a bit more.

What analysts say

  • Buy, sell, or waffle? Eighteen analysts follow Corning, giving the stock a half-dozen buy ratings, 10 holds, and a pair of sells.
  • Revenues. On average, they're looking for sales to tumble 27% to $1.16 billion.
  • Earnings. Profits could be halved, falling to $0.20 per share.

What management says
The big news at Corning recently wasn't actually regarding Corning at all, but rather at a sub-subsidiary of the firm: Hemlock Semiconductor. There we learned that even as Corning proper battens down hatches and tightens up on its capital expenditure budget, the Hemlock entity (which Corning owns a stake in through its joint venture with Dow Chemical (NYSE: DOW  ) ) is ramping up polysilicon production to fuel the meltdown in solar cell prices.

What management does
Not its stated intention, of course, but that could well be the effect. Right now, solar wafer makers like LDK Solar (NYSE: LDK  ) and MEMC Electronic (NYSE: WFR  ) are struggling with tumbling prices for their products. This hasn't reached far enough upstream yet to affect Corning's margins (and really, the firm's bigger customers are buyers of its LCD glass such as LG Display (NYSE: LPL  ) ).

Margins

6/07

9/07

12/07

3/08

6/08

9/08

Gross

45.0%

46.0%

46.9%

48.7%

49.6%

49.5%

Operating

18.5%

20.5%

21.5%

23.8%

25.0%

24.6%

Net

35.3%

36.8%

36.7%

46.2%

86.5%

88.8%

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
Still, sliding wafer prices could ultimately hurt Corning's take from its poly subsidiary, just as the ever-eroding prices of LCD TVs at Best Buy (NYSE: BBY  ) and Sears Holding (Nasdaq: SHLD  ) have sapped Corning's pricing power in the TV glass market.

As if Corning shareholders needed one more thing to worry about heading into the weekend. Try to enjoy it anyway, though, and we'll update you on how things look after the news breaks next week.

You've read the preview, now read the review(s):

Fool contributor Rich Smith does not own shares of any company named above. Still. The Motley Fool has a disclosure policy. Sears Holdings and Best Buy are Motley Fool Inside Value recommendations. Best Buy is a Motley Fool Stock Advisor selection. The Fool owns shares of Best Buy.


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