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Corning (GLW) Beats on Q1 Earnings Despite Lower Revenues

Corning Incorporated GLW reported healthy first-quarter 2023 results, with the bottom and the top line beating the Zacks Consensus Estimate. Recession-level demand and overall weakness in China affected company’s net sales during the quarter. However, the company’s price and productivity enhancement strategy combined with the improvement in panel-maker utilization partially offset the declining trend.

Net Income

Quarterly GAAP net income was $176 million or an income of 20 cents compared with a net income of $581 million or 68 cents per share in the year-ago quarter. The downside is primarily due to top-line contraction and significantly lower income from translated earnings contract and other income sources year over year. Core net income declined to $350 million or 41 cents per share from $465 million or 54 cents per share reported in the prior-year quarter. The bottom line surpassed the Zacks Consensus Estimate by 2 cents.

Corning Incorporated Price, Consensus and EPS Surprise

 

Corning Incorporated price-consensus-eps-surprise-chart | Corning Incorporated Quote

 

Revenues

On a GAAP basis, net sales declined to $3,178 million from $3,680 million reported in the year-ago quarter. Declining net sales in Display Technologies, Optical Communications and Specialty Materials, due to weak demand in several key markets, hindered the top-line performance. Core sales totaled $3,367, down 10% year over year from $3,744 million. The top line beat the consensus estimate of $3,325 million.

Segment Results

Net sales in Optical Communications declined to $1,125 million from $1,198 million recorded in the prior-year quarter. Net income was $159 million compared with $166 million in the year-ago quarter. Despite a greater-than-normal decline in seasonal volume, pricing and productivity enhancement cushioned net sales in this segment.

Net sales in Display Technologies were reported at $763 million, down 20% year over year. Despite a decline in volume and glass prices, improved market condition in China and the recovery of panel maker utilization partially reversed the declining trend in this segment. Net income was $160 million compared with the prior-year quarter’s figure of $236 million.

Revenues from Specialty Materials were $406 million, down 18% year over year, primarily due to seasonality patterns. Net income was $39 million, down from $75 million reported in the prior-year quarter. Soft demand in smartphone and IT end market hampered the net sales from this segment.

Environmental Technologies witnessed a 5% revenue growth year over year to $431 million. Rising demand for gasoline particulate filter combined with enhanced productivity supported the segment’s top line.  The segment’s net income was $82 million, up from $74 million in the year-earlier quarter.

Revenues from Life Sciences segment declined to $256 million, down from the year-earlier quarter’s tally of $310 million. Net income was down to $9 million from $42 million in the year-ago quarter. Inventory adjustments and lower demand for COVID-related products affected net sales.

Hemlock and Emerging Growth Businesses witnessed a 3% growth in net sales year over year to $386 million. The segment’s net income was $16 million against a net loss of $8 million a year ago.

Other Details

Gross profit declined to $1,003 million from $1,283 million, thanks to falling revenues. Operating income stood at $297 million compared with $570 million in the year-ago quarter. Sequentially, core gross margin improved to 35.2% and operating margin rose to 15.5%, driven by the company’s initiative to improve pricing and productivity.

Cash Flow & Liquidity

During the first quarter of 2023, Corning utilized $49 million of net cash for operating activities against a cash flow of $534 million in the prior-year period. The company registered a negative free cash flow of $383 million against the prior year’s figure of $171 million.

As of Mar 31, 2023, Corning had $1,146 million in cash in cash and cash equivalents with $6,654 million of long-term debt.

Outlook

For the second quarter of 2023, Corning estimates core sales in the band of $3.4 billion to $3.6 billion. Core earnings per share is expected in the range of 42-49 cents. Despite the weakness in multiple markets, management expects sales, profitability and cash flow to improve. Management is planning to continue to better align its cost structure, improve pricing and productivity and take further profit improvement initiatives to push the company in the long-term growth trajectory.

Zacks Rank & Stocks to Consider

Corning currently carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Arista Networks, Inc. ANET, carrying a Zacks Rank #2 (Buy), delivered an earnings surprise of 14.17%, on average, in the trailing four quarters. Earnings estimates for ANET for the current year stand at $5.83 per share. Arista provides cloud networking solutions for data centers and cloud computing environments. The company offers 10/25/40/50/100 Gigabit Ethernet switches and routers optimized for next-generation data center networks.

It continues to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. It is well-poised for growth in data-driven cloud networking business with proactive platforms and predictive operations. Arista has introduced network observability software, DANZ Monitoring Fabric (DMF), on its switching platforms for enterprise-wide traffic visibility and contextual insights.

Juniper Networks, Inc. JNPR, carrying a Zacks Rank #2, delivered an earnings surprise of 1.55%, on average, in the trailing four quarters. It is witnessing strong momentum across its core industry verticals and is confident of its long-term prospects. Investments in customer solutions and sales organizations have enabled the company to capitalize on the solid demand across end markets.

Juniper is a leading provider of networking solutions and communication devices. The company develops, designs and sells products that help build a network infrastructure for services and applications based on a single Internet protocol network worldwide. The company caters to the networking needs of enterprises, public sector organizations and service providers across the globe.

Splunk Inc. SPLK, sporting a Zacks Rank #1, delivered an earnings surprise of 131.1%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 83.78%. Splunk provides software solutions that enable enterprises to gain real-time operational intelligence by harnessing the value of their data. The company's offerings enable users to investigate, monitor, analyze and act on machine data and big data, irrespective of format or source and help in operational decision-making.

Its software has a broad range of applications, including security analytics, business analytics and IT operations. Splunk is benefiting from healthy customer engagement, evident from the consistently high net retention and competitive win rates alongside solid momentum with large orders overall.

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