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Falling LCD Prices And Seasonal Declines May Hamper Corning's Sales

Jan 28 2014, 7:21am CST | by

Quick Take Corning’s fourth quarter earnings will face pressure from moderate LCD price declines and seasonal fluctuations in its telecommunications business. Gorilla Glass sales are expected to be...

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37 weeks ago

Falling LCD Prices And Seasonal Declines May Hamper Corning's Sales

Jan 28 2014, 7:21am CST | by

Quick Take

Corning is set to release its fourth quarter earnings results on January 28, 2014. In the previous quarter, Corning’s core sales grew 10% driven by growth in the telecommunications segment. The sales growth was also supported by recovery of its LCD glass business. Though LCD glass shipment volume grew, it was partially offset by moderate LCD price declines caused by excess inventory. In the fourth quarter, we expect the price declines to continue, resulting in a decline in revenue for Corning’s display business. Seasonal declines in the telecommunications segment will also put pressure on the company’s top line in the fourth quarter.

See our complete analysis of Corning here

Display Technologies Segment May Face Headwinds Due To LCD Price Declines

In the third quarter 2013, Corning’s display technologies segment was negatively impacted by falling LCD prices. However, growth in LCD glass shipment volumes, driven by demand for larger screen sizes for televisions, monitors and tablets, more than offset the negative impact of LCD price declines, which resulted in 7% growth in the segment’s core sales.

We expect that in the fourth quarter, LCD prices will continue to face moderate declines, similar to that in the third quarter. Although, unlike the third quarter, volume growth may be absent as the LCD industry continues to utilize the inventory buildup to feed demand in the fourth quarter. This will add to the negative impact of the price declines, resulting in a decrease in sales for Corning’s display technologies segment. However, the utilization of past inventory also means that we expect to see volume growth in 2014.

Telecommunications Segment Sales May Decline

Corning’s telecommunications segment showed strong growth in the third quarter 2013 with a 24% increase in core sales. However, Corning anticipates its results to fall in the fourth quarter due to normal seasonal declines in this business. The company said that this decline will also be effected by falling optical fiber sales in North America and China, and slower than anticipated construction of the National Broadband Network in Australia, which seeks to bring fiber-to-the-premises Internet connection to more than 90% of Australian homes.

Gorilla Glass’s Inventory Accretion Will Continue To Impact Sales

In the third quarter 2013, Corning’s specialty materials core sales, majority of which comes from one of Corning’s most popular product, Gorilla Glass, was down 10%. Sales of Gorilla Glass have been declining throughout the year due to the impact of excess inventory that built up in the supply chain in the fourth quarter of 2012. We expect the inventory build-up to continue to hamper Gorilla Glass sales in the fourth quarter as well. However, the impact is not expected to spill over into 2014. Gorilla Glass volumes are also expected to be down due to a difficult comparison with last year’s strong fourth quarter, when the inventory build occurred.

Corning believes that Gorilla Glass presents a long-term growth opportunity, driven by the emergence of touch-based notebooks and the already popular touch-screen mobiles. Also, Gorilla Glass may now have potential application in the flexible display market, enabled by Corning’s recently announced capability to manufacture Gorilla Glass in various shapes.

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Source: Forbes Business

 
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