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Corning's Crystal Ball Guides Gorilla Glass to Greatness

By Evan Niu, CFA - Nov 27, 2012 at 8:01PM

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More smartphones is a good thing.

Glassmaker Corning (GLW -1.16%) had a booming day today, with shares jumping by as much as 9% as the company provided strong outlook at a Credit Suisse Technology Conference. The company said fourth-quarter LCD glass volumes are "stronger-than-forecasted." The Gorilla Glass business continues to show strength with full-year sales approaching $1 billion.

Demand for LCD televisions is coming in better than hoped, and exec Tony Tripeny expects glass market volumes to grow in the low single digits this quarter, which is much better than the low-to-mid single digit drop the company was previously expecting. The Chinese New Year holiday is approaching and the supply chain is gearing up for a strong season in China.

Tripeny also said that Corning is boosting guidance in its specialty materials segment, which includes the Gorilla Glass business. The division should see sales grow by roughly 5% sequentially thanks to "numerous new consumer electronics product introductions."

That could refer to Google's (GOOGL -1.34%) new Nexus 4 smartphone or Nexus 10 tablet, both of which feature Corning's Gorilla Glass 2. The Nexus 4 in particular is seeing robust sales, with inventory of both configurations sold out on Google Play. The Nexus 10 remains in stock, but strong Nexus 4 sales are good news for Corning. Tripeny could also be talking about Apple's (AAPL 0.17%) iPhone 5, which also sports Gorilla Glass and is now catching up with demand. Translation: Apple is selling a ton of units, which is also good for Corning.

Hitting $1 billion in Gorilla Glass sales this year would be quite a feat, considering the entire specialty materials segment generated just under $1.1 billion (14% of total sales) throughout all of last year and just $578 million (9% of total sales) in 2010. Through the first three quarters of 2012, specialty materials sales have totaled $947 million.

The announcement was enough to trigger an upgrade from Topeka Capital, who now considers Corning a buy. Analyst Brian White also notes that shares currently trade below tangible book value, adding even more bullish context to the rosy guidance.

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