Corning Fragile: Handle With Care

Corning (GLW Quote) developed a few cracks in its glass business last year, and some analysts see even bigger fractures ahead.

The firm, which makes glass and ceramic products, will release its fourth-quarter earnings before the bell Tuesday, and while Corning investors have already weathered two profit warnings, analysts await an even dimmer outlook.

Big-screen liquid crystal display TVs didn't all fly off the shelves as quickly as expected last quarter as the economy put a squeeze on consumer purchases. This slowdown in purchases created reductions in panel orders, which in turn slashed glass orders from suppliers like Corning.

"The deterioration in the LCD industry," writes Barclays' analyst CJ Muse, has led to a substantial mismatch between glass supply and demand, driving meaningful price degradation starting in the first quarter of 2009."

Given the drop in panel shipments by AU Optronics (AUO Quote) and LG Display (LPL Quote), Muse estimates that orders for Corning LCD glass volume will fall 10% sequentially in the first quarter.

The slump in demand has forced Corning to abandon its price discipline. For nearly two years, Corning refused to cut prices more than 2%, but has recently given in to the pressure.

"Our checks suggest that Corning is now quoting first-quarter prices down as much as 10% to 15%," Muse writes in a research note Monday.

These projected declines aren't necessarily reflected in Wall Street expectations for Corning.

Analysts expect Corning to post earnings, excluding one-time items, of 19 cents a share on $1.15 billion in sales. And looking ahead to the March quarter, analysts expect adjusted profit to drop a penny to 19 cents a share on revenue of $1.1 billion, according to First Call.

Corning shares fell 25 cents, or 2%, to $9.75 in midday trading Monday.