If Corning Incorporated (GLW 0.48%) was destined to suffer the full wrath of today's global economic weakness, it might seem the glass technologist didn't get the memo. But upon closer inspection -- and with the help of its new $20 billion long-term capital allocation plan put into place last quarter -- Corning continued to demonstrate its ability to position itself for success no matter what challenges the industry throws its way.

Shares of Corning rose nearly 6% Tuesday after the company's fourth-quarter 2015 earnings exceeded expectations. But before we delve deeper, let's tackle Corning's headline numbers:

Corning results: The raw numbers


Q4 2015 Actuals

Q4 2014 Actuals

Growth (YOY)

Core revenue

 $2.402 billion

 $2.534 billion


Core net income

 $429 million

 $587 million


Core EPS (diluted)




DATA SOURCE: Corning Incorporated.

What happened with Corning this quarter?

  • Generated adjusted operating cash flow of more than $1 billion, bringing full-year adjusted operating cash flow to $3.2 billion.
  • Generated free cash flow of $628 million, bringing full-year free cash flow to $1.5 billion.
  • Spent $1.3 billion to repurchase shares in Q4, bringing full-year repurchases to $3.2 billion to retire 151 million shares.
  • Ended the year with $4.6 billion in cash, roughly $1 billion of which is in the U.S.
  • Saw continued moderation of LCD glass price declines (Q4 marked the lowest sequential declines of 2015).
  • Announced "realignment" of interest in Dow Corning, unlocking value from a silicones business that falls outside Corning's core competencies:
    • Transaction should be tax free and accretive to earnings per share.
    • Newly formed entity will be wholly owned by Corning, and hold 40% ownership in Hemlock Semiconductor and $4.8 billion in cash.
  • Announced that Ford's GT supercar is using Corning Gorilla Glass for Automotive in its windshield and in two other windows.
  • Established long-term supply agreement with "low-cash investment" in a gen-10.5 glass manufacturing facility with Chinese display leader BOE, while extending existing long-term agreements for gen-8.5 and smaller panels through 2025.
  • Display Technologies segment core sales fell 14.4% to $903 million, inline with guidance as LCD glass volume fell slightly from last quarter as expected. Display core earnings fell 34.3% to $234 million.
  • Optical Communications segment sales rose 8.9% to $736 million, better than expected and driven by stronger carrier network sales. Optical core earnings fell slightly to $47 million, mostly because of lower-margin product mix from Corning's acquisition of Samsung Electronics' fiber optic business early last year.
  • Environmental Technologies sales rose slightly to $254 million, also better than anticipated because China's stimulus for car sales drove demand for light-duty products. Environmental core earnings fell 19.4% to $29 million, mostly because of lower heavy-duty product volume and the weaker euro.
  • Specialty Materials sales fell 13.8% to $275 million, driven by lower Gorilla Glass volume following a strong Q4 last year. However, specialty core earnings increased 46.7% to $44 million, thanks to higher Gorilla Glass 4 margins, improved cost management, and lack of a one-time unfavorable customer write-off in last year's fourth quarter.
  • Life Sciences sales fell 6% to $202 million, and core earnings declined 33.3% to $12 million, primarily because of foreign exchange. Both metrics would have climbed on a year-over-year basis excluding currencies.
  • Dow Corning Corporation core equity earnings fell 29.7% to $78 million, as expected, including a $39 million contribution from Hemlock.

What management had to say
During the subsequent conference call, Corning CEO Wendell Weeks added:

Well, no surprise; the global economy is impacting our company. Nonetheless, we continue to make solid progress on many critical fronts. Despite the worst display industry environment in five years, glass price declines are the smallest they've been in five years. This provides us a good foundation for stabilizing returns in this business. We're generating excellent operating cash flow and we are returning cash to our shareholders. We are beating the competition and we have a great opportunity set ahead of us, as exemplified by our recent progress on attacking the automotive glazing market with Gorilla Glass. Now we look forward to sharing many more details of our strategy and capital allocation framework at our annual investor meeting next week.

Looking forward
For the first quarter of 2016, Corning now expects revenue to increase in the low-single-digit range from last year, while gross margin should decline sequentially by roughly one percentage point to 41%, primarily because of lower Display Technologies and Gorilla Glass volume.

That said, gross margin is also expected to improve along with volumes as the year progresses, starting in the second quarter. And for the full 2016, Corning expects its own revenue growth to outpace the broader market's anticipated low-single-digit percentage gains. By contrast, going into the call, Wall Street's consensus estimates predicted that Corning's full-year revenue would fall slightly on a year-over-year basis.

In the end, Corning's latest quarter wasn't punctuated by the eye-popping growth many tech investors have grown accustomed to seeing elsewhere. But in the absence of that growth, Corning continues to deliver on its stated intention to not only reward shareholders through capital returns, but also to continue to innovate and solidify its market leadership.