Don't say you weren't warned.

Earlier this week, in our Foolish Forecast previewing Corning's (NYSE:GLW) second-quarter release, I suggested that investors might react badly if management predicted anything less than roses and sunshine for the LCD TV market, from here to eternity. Well, Corning didn't (predict economic nirvana), and investors did (react badly).

Now that Mr. Market's thrown his hissy fit over Corning's news, it's time for long-term-investing Fools to take a step back and review the damage -- see if it's quite as bad as everyone else seems to think. Onward, now, to ...

Headline news
Q2 sales were up 19% year over year, which while nice, was not quite as good as management had led us to expect. On the other hand, profits, excluding all sorts of one-time items, matched guidance at $0.49 per share. That was 44% better than last year, and you can credit the gains to massive improvement in margins. Corning grew its gross margin 390 basis points to 50.4%, and its operating margin an incredible 930 basis points to 24.6%.

That's even better margins than the TV makers manage. AU Optronics (NYSE:AUO) and LG Display (NYSE:LPL) both score about a 20% operating margin. Sony (NYSE:SNE) scrapes by on 4%. (Why, even the "low margin retailers" who sell the sets do better than that -- Best Buy (NYSE:BBY) and Wal-Mart (NYSE:WMT) both pull down close to 6%.)

Corning, Interrupted
Speaking of manufacturers and retailers, earlier this month, I noted that rumblings of a decline in LCD demand were beginning to drown out three months' worth of happy talk from Corning.

For what it's worth, Corning pumped up the volume on its side of the debate this week, arguing once more that things are not as bad as some may fear. The company pointed out that retail sales of LCD TVs were up more than 30% year over year in the first half of 2008, and predicted that we will close out the year with LCD glass sales up 25% to 30%. Corning is looking for basically the same quarterly performance in Q3 -- $0.48 to $0.51 per share in "earnings before items," on sales of $1.65 billion to $1.72 billion.

Word to the Foolish
Let's close out today's story with a bit of trivia you can tuck away in the back of your brain for the next 12 months. Whatever net profit margin you see quoted on Corning -- ignore it. The company recorded a mammoth $2.4 billion tax benefit in Q2, giving it a nonsensical 190% net margin for the quarter. For the foreseeable future, trailing net margin data on Corning will be worse than useless.

Read more about Corning's recent performance in:

Fool contributor Rich Smith does not own shares of any company named above.  Best Buy and Wal-Mart are Motley Fool Inside Value picks. Best Buy is also a Stock Advisor selection. The Motley Fool owns shares in Best Buy. The Fool has a disclosure policy.