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Corning Q1 Profit Rises, Beats View - Update

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Specialty glass and ceramics maker Corning Inc. (GLW) reported Wednesday a significant growth in profit for the first quarter, boosted by strong double-digit increase in net sales. Adjusted earnings as well as top line surpassed market projections. The Corning, New York-based company also provided a segmental sales growth view for the second quarter.

First-quarter net income was $816 million or $0.52 per share, compared to net income of $14 million or $0.01 per share in the same quarter last year.

On a non-GAAP basis, net income grew 445% to $818 million from prior year's $150 million, and earnings per share went up 420% to $0.52 from $0.10 a year ago.

On average, 20 analysts polled by Thomson Reuters expected the company to earn $0.42 per share for the quarter. Analysts' estimates typically exclude special items.

James Flaws, vice chairman and chief financial officer of the company, commented, "We were very pleased with our first-quarter results. Even without the lower tax rate, EPS was significantly better than Wall Street's expectations."

Sequentially, first-quarter net income rose 10% from $740 million or $0.47 per share, and non GAAP net income grew 18% from $696 million or $0.44 per share reported in the fourth quarter.

In the first quarter, Corning's equity earnings surged to $469 million from $195 million a year ago. Equity earnings from Dow Corning Corp., a joint venture equally owned by Corning and Dow Chemical Co. (DOW), were $112 million, compared to prior year's $5 million. The company pointed out that quarterly results were also benefited by its decision to repatriate about $1 billion of current year earnings from certain foreign subsidiaries.

Net sales for the quarter were $1.55 billion, up 57% from $989 million in the comparable quarter last year, and beat Wall Street analysts' consensus estimate of $1.52 billion. Sequentially, net sales rose 1% from $1.53 billion in the fourth quarter.

On a segmental basis, sales from Display Technologies climbed 119% year-over-year and 9% sequentially to $782 million, on improved display manufacturing performance. In the quarter, glass prices were down slightly and in line with expectations. Display Technologies' wholly owned business volume grew 127% from last year, and Samsung Corning Precision Glass Co., Ltd. volume was up 64% year-over-year.

Telecommunications segment sales declined 5% from last year and 10% sequentially to $364 million, but was in line with the company's expectations.

In the Environmental Technologies segment, quarterly sales rose 75% year-over-year to $192 million, and were better than expected, mainly on higher-than-anticipated demand for auto emissions products, particularly in North America and China.

Sales were $96 million in Specialty Materials segment, up 60% from last year, benefited by the continued popularity of Gorilla glass. In the Life Sciences segment, sales went up 55% to $118 million.

First-quarter gross profit surged to $731 million from prior year's $270 million and gross margin improved significantly to 47% from 27% last year and 42% in the previous quarter. Operating income was $403 million, while the company recorded a loss of $260 million in the prior year.

Commenting on the results, Wendell Weeks, chairman and chief executive officer, said, "Our first quarter was outstanding, driven by excellent results across nearly all of our major business units. We were particularly pleased with the performance in Display Technologies where we were essentially sold out. We are also encouraged by the growing market demand for Corning Gorilla glass for handheld and other electronic devices."

Corning's JV partner Dow Chemical reported Wednesday that its first-quarter net income available to common stockholders were $466 million or $0.41 per share, up from $24 million or $0.03 per share in the same quarter last year. Adjusted earnings were $0.43 per share, compared to earnings of $0.11 per share last year. Dow's net sales were $13.42 billion, up from $9.04 billion in the prior year.

Looking ahead for the second quarter, Corning expects volume in its Display Technologies segment to increase in the mid-single digits for both its wholly owned business and SCP. Glass price declines should be similar to that of the first quarter, the company said.

In the Telecommunications segment, second-quarter sales are projected to increase by 10% to 15% sequentially, with strong performance by optical fiber and cable sales across North America and China. The company also expects sales of hardware and equipment and private network products to remain strong.

Further, Environmental Technologies second-quarter sales will be comparable to the first quarter, while sales in the Specialty Materials segment are anticipated to increase in the range of 15% to 25% sequentially, driven by continued growth in Gorilla glass. In the Life Sciences segment, sequential sales are projected to be up 5%.

For the second quarter, the company expects equity earnings to be down 3% to 5%, excluding the Dow Corning tax gain. The company noted that Dow Corning's equity earnings will be sequentially comparable, despite higher costs, while Samsung Corning Precision's equity earnings are expected to be down about 5% in the quarter due to fluctuations in foreign exchange rates.

Corning now projects a range of 2.9 billion square feet to 3.1 billion square feet of glass this year, up from its original expectation of 2.8 billion to 3.0 billion square feet. The revised forecast represents a year-over-year growth rate of 18% to 27%.

According to Flaws, the revision in expectations for the annual growth of the LCD glass market reflects higher-than-expected retail demand in the first quarter for LCD televisions, laptops, and desktop computers in the first quarter, together with an improved outlook for these products through the remainder of the year.

In addition, Corning lifted its forecast of capital expenditures to $1 billion for 2010 from the previous estimate of $600 million to $700 million.

Flaws added, "We are off to a very good start in 2010. However, we will remain cautious and continue to exercise tight control over spending."

GLW closed Tuesday's regular trading session at $20.12, down $0.80, on a volume of 19.2 million shares. In the pre-market activity, shares rose $0.27 or 1.34% to $20.39.

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