Corning Inc. (GLW): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report


Corning is primarily a developer of advanced glass substrates for multiple markets. Third quarter earnings were slightly ahead of the Zacks Consensus Estimate, despite the fact that revenues came in short. The weaker-than-expected demand for touch-screen computing devices impacted revenues, but Corning's strong position in other markets should not be discounted. Though Corning's huge debt balance adds to its risk, net cash remains positive and interest payments small with respect to earnings. With growth prospects for GG becoming uncertain and sapphire growing into more of a threat, we maintain a Neutral rating on Corning shares.


New-York based Corning Incorporated started out as a glass business that was reincorporated in 1936. The company has since developed its glass technologies to produce advanced glass substrates used in a large number of applications across multiple markets. Currently, Corning reports results under five segments.

The largest segment is Display Technologies, which includes the glass substrates that are commonly found in the liquid crystal displays (LCDs) of LCD TVs, notebooks and flat-panel desktop PC monitors. The company's specialty is in active-matrix substrates that include a matrix of transistors and capacitors (called thin-film transistors, or TFTs), in addition to the polarizing sheets and cells of liquid crystal. This technology basically improves the brightness and sharpness of images, thus enhancing the quality of the display.

The company's Optical Communications products may be categorized into two. The first category comprises cables, which are based on proprietary optical fiber technology specialized for various markets, such as fiber-to-the-premises (FTP), local area networks (LANs), metropolitan area networks (MANs), long-haul networks and even submarine networks. Products are typically sold to its own subsidiaries, which then distribute to end users. The second category is hardware and equipment, which comprises optical and copper connectivity products. The optical line includes cable assemblies, fiber optic hardware, fiber optic connectors, optical components and couplers, closures and pedestals, splice and test equipment and other accessories, while the copper line includes subscriber demarcation, connection and protection devices, xDSL passive solutions, and outside plant enclosures.

The Environment Technologies segment makes ceramic substrates required for mobile and stationary pollution and emission control systems. The primary users of Corning's products are automotive and diesel engine manufacturers. Corning s products have become the standard in the industry and recent revisions in emission control standards are driving both R&D and revenue for the company in this segment.

Specialty Materials include different formulations for glass, glass ceramics and fluoride crystals that render special properties to each separate substrate, making it suitable for specific industrial and commercial use. For example, Corning's substrates are currently used in display optics and components (including optical quality glass for high-end portable devices and touch screens), semiconductor components, as well as for aerospace & defense and astronomy applications. They are also used in ophthalmic products and as telecommunications components.

Life Sciences segment products are sold under the Corning, Costar and Pyrex brands primarily for laboratory equipment, such as microplate products, coated slides, filter plates for genomics sample preparation, plastic cell culture dishes, flasks, cryogenic vials, roller bottles, mass cell culture products, liquid handling instruments, Pyrex glass beakers, pipettors, serological pipettes, centrifuge tubes and laboratory filtration products.

The company has extensive manufacturing facilities, most of which are located in the U.S. The Display Technologies segment has manufacturing operations in the U.S. (Kentucky), Japan, Taiwan and China the Telecommunications segment in the U.S. (Concord and Wilmington, North Carolina), Poland and Germany the Environment Technologies segment in the U.S. (New York and Virginia), China, Germany and South Africa Specialty Materials in the U.S. (New York and Virginia), France and China and Life Sciences in the U.S. (Maine and New York) and Mexico.

The marketing effort varies, depending on the customers. Corning's Display Technologies products are sold to panel manufacturers all over the world except Korea, which is served by the Samsung Corning JV. Most of the Telecom products are sold through the Corning Cable Systems LLC and Corning Cable Systems Polska subsidiaries. However, a small percentage is also sold directly to end users and third party cablers. Environmental products are sold to manufacturers of emission control systems who then sell to automotive and diesel engine manufacturers. Life Sciences products are primarily sold through distributors.

Competition is fierce in each of the served markets and generally comes from a large number of smaller players. Some of the larger competitors include Asahi Glass, Nippon Electric Glass and Avan Strate (Display Technologies) Electric/OFS, Fujikura Ltd., Sumitomo Electric, Prysmian Cables & Systems and Draka Comteq (Telecom) NGK, Denso, Ibiden and Emitec (Environmental) Schott, Shin-Etsu Quartz Products, Asahi Fine Glass, Carl Zeiss, Nikon, Transitions Optical, Oerlikon, Hoya and Heraeus (Specialty) and Schott, Kimble, Greiner and Becton Dickinson (Life Sciences).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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