Updated from 1:40 p.m. EDT
Driven by a strong appetite for its optical networking technologies,
said Monday that its third-quarter net profits rose 79%, but the company failed to inspire Wall Street, which may have wanted even more.
Corning said its pro forma earnings more than doubled to $317 million, or 35 cents a share, beating Wall Street's consensus estimate of 34 cents a share, according to
First Call/Thomson Financial
. The results, which exclude acquisition costs and other special charges, compare with earnings of $148 million, or 19 cents a share, in the comparable quarter of last year.
Including those items, Corning's net profits rose to $254 million, or 28 cents a share, from $142 million, or 18 cents a share, a year ago. Corning's third-quarter revenue, meanwhile, climbed 54% to $1.9 billion, from $1.25 billion a year ago. Revenue increased 37%, excluding the effect of acquisitions.
Shares of Corning, however, ended Monday regular trading down $4.50, or 4.25%, at $101.44. The company's stock has made a steady ascent over the last year, but is off a 52-week high of $113.31 hit near the end of the summer.
Corning recently told Wall Street to expect earnings of 34 to 35 cents a share, elevating analysts' hopes. So after the positive announcement, amid lofty expectations for optical networking companies, Wall Street may have been looking for even greater growth, "something with a little more oomph," said Peter Andrew, who covers the company for
A.G. Edwards & Sons
But positive signs abound, analysts said. For instance, Corning explained that sales of its high-capacity optical fiber product, Leaf, are likely to increase as a percentage of total fiber sales, heading from 30% this year to 35% in 2001, said Steven Fox, an analyst at
The trend bodes well for Corning, because Leaf remains the highest-margin product in its fiber business, added Fox, whose firm hasn't done any underwriting for Corning and rates its stock a buy. Sales of Leaf in the latest quarter rose 75% over last year's level, Fox noted.
At the same time, Corning said sales from its optical fiber and cable business increased 67% in the latest quarter, while sales of photonic technologies grew 113%, fueled by strong demand for the company's optical amplifiers.
Fox said he was impressed with the photonic technology revenue, which rose 15% from the previous quarter, but noted that the sales suffered because of lackluster business from
, which has struggled lately and often missed earnings projections.
"If not for Lucent's problems," he wrote in his report, "photonics sales would have risen 20% sequentially. The company has now redirected product initially intended for Lucent and expects photonics sales" to increase roughly 25% in the fourth quarter.
The latest optical technology allows telecommunications companies to transmit more voice, data and video traffic at faster speeds, enabling companies to keep pace with surging Internet use. Corning's Ackerman touted his company as a maker of technology that provides "the capacity to double Internet traffic every six months."
Corning, which in 1970 invented the first optical fiber capable of sending information over long distances, occupies the fiber-optic sector with
and Lucent, which, by contrast, is expected to fall short of profit estimates when it reports its earnings after the market closes Monday.
Corning also said it anticipates pro forma earnings between $1.40 and $1.43 a share for 2001, ahead of forecasts and up from expected pro forma earnings between $1.15 and $1.17 a share for 2000. The 2001 figure, though, is 5% lower because of expenses linked to Corning's pending $3.6 billion acquisition of
optical-components business. Corning expects to close that deal by the end of the fourth quarter.
Andrew of A.G. Edwards, which has not done any underwriting for Corning and rates the stock an accumulate, noted that the Corning, N.Y.-based company had not given analysts any indication until now of what to expect in 2001. "We were just throwing darts," Andrew said.