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Corning profit beats expectation, but stock dips

Post Time:Jul 29,2009Classify:Company NewsView:232

NEW YORK (Reuters) - Specialty glass maker Corning Inc (GLW.N) posted better-than-expected quarterly results, citing improved demand for glass for flat-screen televisions which it expects to continue through the rest of the year.

Despite the optimism, shares of Corning, which since late May has been more and more rosy about glass demand this year, fell 4.5 percent on Monday, after rising 10 percent in the last month. The shares are up about 78 percent so far this year.

Some experts said they had anticipated an even more optimistic outlook from Corning, whose competitors include Japan's Asahi Glass Co Ltd (3333.T).

Corning forecast its total third-quarter display volumes to be flat to up slightly from the second quarter, adding that the estimates for the current quarter "are much higher today than they were just a few months ago." It expects display gross margins to be consistent with the second quarter's.

"We are surprised Corning expects glass shipments to be up only slightly from the second quarter," said Standard & Poor's Equity Research analyst Todd Rosenbluth, who kept his rating on the stock at "hold." "Nonetheless, we believe Corning's margins will be wider than we previously forecast."

The company, whose glass is also used for fiber-optic cables and in truck engines, said second-quarter net income was $611 million, or 39 cents a share. Analysts were looking for 32 cents per share, according to Reuters Estimates.

A year earlier, net profit was $3.2 billion, or $2.01 a share, and income excluding special items was $782 million, or 49 cents a share.

Revenue fell 18 percent to $1.4 billion in the second quarter from a year earlier, but was better than the $1.36 billion that analysts had expected.

Selling, general and administrative expenses fell 19 percent to $211 million, and spending on research and development fell 20 percent to $131 million.

The report appeared to be a clear sign of recovery for Corning, which earlier this year had been struggling to plan for the future in a decaying economic environment, where both consumers and corporations were curtailing spending.


Chief Financial Officer Jim Flaws said the world is still experiencing a healthy television replacement cycle. Global LCD TV sales were up 27 percent in April and 33 percent in May, he said, led by strength in China and Japan.

"We obviously have a very powerful technology substitution going on now, as people replace their CRT televisions with the flat screens. We believe it will be a very strong holiday season for televisions (and) a very positive holiday season in the U.S. and Europe," he told Reuters in an interview.

Analysts were encouraged by Corning's decision to boost its outlook for total 2009 glass volume to 2.3 billion square feet, up about 15 percent from last year.

"They didn't give precise top- and bottom-line estimates for their business, but they raised their view of the overall LCD market, and I think that implies for Corning the second half of the year should remain quite solid," said analyst Yair Reiner of Oppenheimer & Co.
Last month, research firm DisplaySearch raised its forecast for 2009 LCD TV sales, predicting a 21 percent increase in global LCD TV shipments to 127 million units.

Looking ahead, Flaws, in a conference-call response to an analyst's question about the overall glass market, said it expects overall glass demand to increase in 2010 and 2011.

Shares of Corning traded at $16.23 on Monday afternoon, down 77 cents

Source: reutersAuthor: shangyi

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