Jeffries - Please see important disclosure information on...

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Unformatted text preview: Please see important disclosure information on pages 7 - 9 of this report. Event Corning reported Q1 results that were above expectations and offered up strong Q2 guidance and commentary. Key Points • SOLID Q1... Revenues totaled $1.55 billion (+1.4% Q/Q, +57% Y/Y), above our $1.51 billion (Street =$1.52 billion). Pro forma EPS hit $0.49, beating our (and the Street's) $0.42 estimate. • ANOTHER STRONG QUARTER FOR DISPLAY... GOOD GUIDANCE... Glass volume +12% Q/Q, the high side of management's 8-12% guidance. Display margin increased. Corning now expects Q2'10 volume at the company's wholly-owned and SCP Display business to be up mid-single digits Q/Q. With guidance like this, investors aren't likely to be nervous about a Q2 supply chain correction anymore. SCP also looked solid. Corning upped their estimates for the ultimate size of the worldwide glass substrate market in 2010. • ADDING GLASS CAPACITY... From a longer-term perspective, the company is continuing to expand its capacity. Enhancements are coming from: 1) a ramp at the Sharp Gen 10 facility; 2) the addition of Gen 6 tanks in Japan for Gorilla Glass; and 3) a ramp in capacity in Taichung which was taken off line back in 1H'08. Separately, SCP has also plans for capacity increases. • GORILLA GLASS OPPORTUNITY LOOKING INCREMENTALLY BETTER... The organization now has a relationship with one as yet unnamed brand manufacturer for Gorilla Glass designed into a new ultra-thin LCD TV product. TV glass manufacturing is expected to begin in Q3, with some revenue in Q4, and a larger ramp in 2011. Corning is also currently talking with several other brands. • ADJUSTING ESTIMATES... We're taking our '10 and '11 revenue estimates up from $6.15 billion and $6.58 billion to $6.55 billion and $6.98 billion, respectively. On the bottom line, our '10 estimate gets bumped up from $1.70 to $2.10. For next year, our bottom-line estimate remains unchanged at $1.85. Taxes rates are a factor here. Valuation/Risks Risks: 1) macroeconomic uncertainty; 2) supply chain inventory corrections; 3) manufacturing disruptions; 4) customer concentration; 5) currency risk; and 6) any changes to the oligopoly nature of the glass substrate market. Corning's shares trade at 11x 2011 EPS. Our price target remains $23, or 12.4x 2011 EPS – a slight discount to group averages. April 29, 2010 Technology Electronics Supply Chain United States of America Estimate Change Corning (NYSE: GLW) Bang Up Q1, Good Guidance...Maintain Buy Investment Summary We think the Street continues to under-estimate the long term market size and trajectory for LCD TV unit sales – LCD glass substrate is the single largest driver of Corning's business....
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Jeffries - Please see important disclosure information on...

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