GLW Delivers Another Very Strong Quarter

Corning (GLW - commentary - Cramer's Take) reported first-quarter 2008 results earlier today that were above Street consensus. More importantly, the guidance for the second quarter (ending June) is materially above current average estimates.

Revenue in the quarter was $1.62 billion (up 24% year over year but only 2% quarter over quarter), with pro forma EPS of 44 cents (GAAP EPS = 64 cents). The gross margin in the period was 52.2%, up 700 basis points year over year and 430 basis points from fourth quarter. Higher manufacturing efficiencies and, to a lesser degree, foreign exchange were the contributors to gross-margin improvements. The pro forma operating margin was 27.8%, up 910 basis points from last year's levels and 590 basis points sequentially.

Cash from operations was a positive $295 million, up about $100 million from last year's level. The cash account decreased about $200 million, to $3.3 billion, after the repurchase of 3 million shares. Accounts receivable jumped $130 million, adding 6 days to days outstanding (55 days). Inventory increased as well by about $60 million, pushing days of inventory up to 81 days vs. 86 last year but 69 days last quarter.

The display business drove the entire quarter. Revenue was $829 million, up 58% year over year and 7% sequentially. After-tax margins were 81.9%, up 820 basis points year over year and 700 basis points quarter over quarter. Total volumes increased more than 2% quarter over quarter internally and 15% quarter over quarter from the joint venture. Pricing was again in line with expectations, and channel inventory was characterized as being "healthy" at panel manufacturers. The company now expects glass volume growth to be at the high end of its prior 25% to 30% guidance for 2008, and capacity is being added to address expected demand in 2009.

Within telecom, revenue was $421 million, down 4% year over year and 2% quarter over quarter and was a little below expectations due to a slow start to a number of projects in Europe. FTTH demand was quite strong (up 8% quarter over quarter) driven by demand in North America. Clear Curve glass has entered trials at several new customers but will remain on a modest ramp near term.

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At the time of publication, Faulkner had no position in the stocks mentioned.

Bob Faulkner has been in the investment business for 18 years with an exclusive focus on technology stocks. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Faulkner appreciates your feedback; click here to send him an email.

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