Telecommunications fiber maker
forecasted Thursday that its earnings are likely to be higher than Wall Street's expectations.
With its formal earnings announcement less than two weeks off, Corning said it expects to report first-quarter earnings of 53 cents to 55 cents a share before special items. Analysts polled by
First Call/Thomson Financial
had predicted an average of 48 cents a share, based on information provided to them by the company during the quarter.
Full-year earnings will likely exceed the First Call poll of $2.35 a share by at least 10 cents, the company said.
Corning shares gained 3 3/4, or 2%, to 174 in midday trading.
"A lot of it was just caution on the part of the company," said Mark Hassenberg, analyst for
Donaldson Lufkin & Jenrette
. Hassenberg rates Corning shares a buy, and his firm co-managed a secondary offering for the company this year. "The company, over the last 20 years, has always been able to add capacity faster than planned."
Corning has surprised analysts for at least the past five fiscal quarters with better-than-expected earnings. This time, the company said, the discrepancy between its old guidance to analysts and its new guidance to analysts stems from the exploding market for Large Effective Area Fiber cable. Demand for the high-end wire used by long-distance providers "continues to grow at a significant rate and is the primary reason for our improved first-quarter earnings outlook," said Roger G. Ackerman, chairman and chief executive, in a statement.
The company has said it will invest $750 million to expand its fiber-making capacity by 50%.
Corning controls around half of the total fiber market, but its real dominance is in high-end fiber, where Corning has 75% market share and its only meaningful competitor is
, according to Hassenberg. Hassenberg doesn't cover Lucent and his firm hasn't done any underwriting for it.
Increasing demand for broadband service has fueled predictable demand for high-end fiber for at least three years, Hassenberg said.
The company likely errs on the side of caution so consistently because today's investors brutally punish the stocks of companies that miss their earnings guidance by any amount, Hassenberg said.
"The penalty of being two days late is so severe you don't want to tell anybody you're two weeks early," he said.
The company plans to formally report the surprising new earnings after the markets close on April 24.