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Can Corning (GLW) Pull Off an Earnings Surprise in Q1?


Corning Inc GLW is set to report first-quarter 2017 results on Apr 25. Notably, the company has positive record of earnings surprises in all of the trailing four quarters, with an average surprise of 9.95%.

In the last quarter, Corning reported a positive earnings surprise of 13.64%. Earnings of 50 cents per share surged 47.1% on a year-over-year basis and 19% sequentially in the reported quarter.

Adjusted revenues increased 6.2% year over year to $2.55 billion, which comfortably surpassed the Zacks Consensus Estimate of $2.48 billion. Revenues remained flat on a sequential basis.

Corning Incorporated Price and EPS Surprise

Corning Incorporated Price and EPS Surprise | Corning Incorporated Quote

Corning’s first-quarter 2017 guidance is fairly good. Management expects year-over-year growth in revenues, net income and earnings per share (EPS). Glass volume is expected to increase by mid-teen percentage on a year-over-year basis and decline by mid-single digit percentage sequentially. Optical Communications sales are anticipated to increase at least 25% from the year-ago quarter.

Environmental Technologies sales are expected to be flat-to down slightly on a year-over-year basis, while Specialty Materials sales are anticipated to rise by a high-teen percentage range. The Life Sciences business will grow low-single digit percentage from the year-ago quarter.

Based on the quarterly EPS beat and positive guidance, shares have outperformed the Zacks Communications Components industry. While the industry gained 8.1%, the stock increased 11.7%.

Factors at Play

We believe that strength in the optical communications segment and stability in the display technologies segment are key catalysts. We note that 90% of the 2017 glass volume in display technologies segment is already under contract, which improves revenue stability.

LCD glass price is also expected to decline at a rate similar to the year-ago comparable quarter. The anticipated moderate decline in price is positive in our view.

Meanwhile, optical communications segment sales are expected to grow more rapidly owing to strong demand for fiber products, both from the North American network providers and hyperscale data centers.

The recently announced deal with Verizon VZ reflects the strength in fiber demand, as U.S.-based service providers overhaul networks to improve 4G coverage and speed-up 5G deployments.

Moreover, improving manufacturing processes are expected to drive profitability in the optical communications segment.

The specialty materials segment is expected to continue to gain from growing adoption of Gorilla Glass 5 and Gorilla Glass SR+. However, weakness in the environmental technologies segment and sluggish growth in the life sciences business remains a concern.

Earnings Whispers

Our proven model does not conclusively show that Corning will beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 35 cents. Hence, the difference is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Corning carries a Zacks Rank #2, which when combined with Earnings ESP of 0.00%, makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some other companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Teradyne TER with an Earnings ESP of +2.63% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Motorola Solutions MSI with an Earnings ESP of +10.00% and a Zacks Rank #2.

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