Corning lowers 3Q earnings, sales outlook

Wed Sep 3, 2008 9:52 AM EDT

ROCHESTER — Shares of Corning Inc. tumbled 12.6 percent to a three-year low Wednesday after the company lowered its third-quarter sales and profit guidance to reflect a bigger-than-expected drop in orders for glass used in flat-screen televisions and computers.

The specialty glass and ceramics maker now expects earnings per share excluding special items will range between 43 cents and 45 cents a share on sales of $1.58 billion to $1.62 billion. Previously, it forecast adjusted profit of 48 cents to 51 cents on sales of $1.65 billion to $1.72 billion.

On average, analysts surveyed by Thomson Reuters expect adjusted earnings of 49 cents per share on sales of $1.7 billion.

The world's largest maker of glass for liquid-crystal-display televisions and PCs, based in Corning in western New York, said LCD-TV sales remain strong in the U.S. as prices decline. But flat-panel electronics companies in Asia are cutting back on glass orders to work off surplus inventory, it said.

DisplaySearch, a market research firm based in Austin, Texas, expects 30.2 million LCD-TVs will be shipped in North America this year, up nearly 25 percent from 24.2 million in 2007.

"There's a whole lot of cautious optimism on the part of television brands where they think that the market will do well and, if pricing continues to fall, it should do OK," said analyst Paul Gagnon. "But everybody is being cautious and probably holding back on ordering as many panels as they normally would."

Corning issued the revised forecast ahead of a presentation by Chief Executive Wendell Weeks at the Citi Investment Research Technology Conference in New York. The news sent its stock down $2.45 Wednesday to $17.05 — its lowest closing level since July 2005.

The company said its display technologies sales jumped 33 percent to $809 million in the April-June period. But its largest business was hurt by a manufacturing interruption that affected shipments to one of its customers, reducing second-quarter revenue by about $24 million and profit by $16 million.

In addition, the company has said some panel makers, mostly in Taiwan, slowed their purchase orders this summer to try to reduce a buildup in inventories as prices fall.

"We believe that the set assembly portion of the supply chain built too much inventory in the first half of this year," Weeks said in a statement. "As set assemblers have continued to hold back on orders, panel makers have lowered prices and reduced utilization rates to balance the supply chain. We think these utilization cutbacks will continue into September in Taiwan."

Third-quarter volume in Corning's wholly owned display-glass business is expected to fall 5 percent compared with the second quarter, instead of its previous guidance which called for sales to be flat or grow up to 5 percent.