Q4 Preview: Recent Upside in Corning (GLW) Shares Has Investors Shrugging at Shipment Warning

Shares of Corning Inc. (NYSE: GLW) closed up 1.7 percent Tuesday ahead of the release of its fourth-quarter results before the opening bell on Wednesday.

The Wall Street quarterly consensus for Corning Inc. is $0.33 per share in earnings on $1.84 billion in sales. During the fourth quarter of last year, the company reported earnings of $0.46 per share on $1.76 billion in total sales.

For the full year 2011, analysts on the Street are currently estimating $1.78 per share in earnings on $7.85 billion in total sales.

The fourth quarter conference call is scheduled for 8:30 am ET.

Notably, on November 29th, Corning reduced its fourth-quarter shipment outlook. Although shares fell as much as 15 percent following the warning, the stock has taken back much of the loss and is down just 1 percent since the end of November.

According to data from Bloomberg, shares of Corning Inc. have 15 Buy ratings, nine Hold ratings and two Sell ratings. The average price target on shares of GLW is $16.50 with a range from $11.50 to $23.

Analyst Comments:

• Goldman Sachs forecasts results will be relatively inline with its revised guidance for the quarter. The firm sees earnings of $0.34 per share on $1.832 billion in sales. The slightly higher earnings estimate reflects a lower cost assumption, but the firm notes it remains on the sideline due to the belief LCD glass supplies will be hit with overcapacity in 2012.
  
  An analyst at Goldman commented, “With panel prices near cash cost levels for several consecutive quarters (leading to negative operating margins for the panel makers), pricing pressure on the glass makers has increased. As a result, we expect Corning’s Q4 glass pricing to be down 11 percent qoq. We think Display revenues will come largely in line with our $717 mn estimate, as aggregate sales at key Taiwanese panel maker customers CMI, AUO, Hannstar, and CPT were down 2.2% qoq though large-sized units shipments were down 8.6% qoq in Q4.”
  
  Goldman reaffirmed its Neutral rating and $13 price target on the company ahead of the release.
  
  
• KeyBanc reiterated its Hold rating on the company ahead of the earnings release, but said it would be more constructive on shares if the company could maintain market share and margins in Display increases. The firm said it would also get more confident in the stock if the company grew earnings aggressively in non-Display segments, and/or generated about $2 billion/year in free-cash flow.
  
  An analyst at KeyBanc said, “Assessing the downside risk of faster than expected OLED TV adoption suggests only a modest impact to glass demand. Our current glass demand model forecasts a 3% OLED TV penetration rate in 2015 and that two pieces of LCD glass are used per OLED TV. As such, there would be no impact from OLEDs to our LCD glass volume forecast. If we run our model assuming a 6% penetration rate for OLED TVs and that only one piece of LCD glass is used per OLED TV, the four-year CAGR is 5.1%. If in the unlikely scenario both pieces of glass are replaced with plastic or metal substrates, the four-year CAGR becomes 4.1%. As such, in a worst case scenario, which we believe has a very low probability, the impact to the LCD glass market’s volume growth over the next four years would be 200bps.”
  
  The firm forecasts earnings of $0.32 per share for the quarter.

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