--Management considers stock undervalued
--Glass price declines still slowing
--Telecom unit sales drop
(Adds analyst comment, fresh stock quote, more detailed guidance
starting in third paragraph.)
By Drew FitzGerald
Corning Inc.'s (GLW) first-quarter earnings rose 4.2% as the
materials maker benefited from lower tax costs and stabilizing
prices for its television glass, offsetting weaker sales from its
telecom business.
The maker of materials for electronics, fiber-optic cables and
medical-lab equipment also added a penny to its quarterly dividend
payout and introduced a $2 billion stock-buyback plan, committing
to return a total of $3.2 billion to shareholders through 2014. The
dividend boost marks Corning's third increase in the past 18
months, reflecting its executives' impatience with the company's
modest stock gains to date.
Shares jumped 4.7% to $13.74 Wednesday. The stock has gained 9%
this year, rallying from a low of $11.13 hit in November.
Corning, which relies on sales of LCD-TV glass for the bulk of
its profits, has seen its exposure to the consumer-electronics
market push down results in recent quarters, as soft demand
depresses prices for TV sets and the components they use. Last
year, the company tweaked its LCD-glass pricing strategy to help
stabilize prices, prompting a backlash among investors worried new
pricing agreements might backfire.
The company's stronger-than-expected profit in the first quarter
"basically proved for the first time that the pricing arrangement
has worked," Sterne Agee & Leach analyst John Shen said.
"Management said that it would get better in this quarter, and they
delivered on that."
Chief Financial Officer James B. Flaws on Wednesday said more
moderate first-quarter price declines helped stabilize earnings in
the company's display-technologies business, its largest top-line
contributor. The company expects price erosion to continue easing
this quarter, decreasing between 2% and 3%, as it maintains its
share of the market.
Mr. Flaws said keeping those price declines in check "has been a
critical issue for us" as Corning strives to continue growing its
profitability.
"Our price declines that we're guiding to are the lowest that
we've seen since 2011," he told Dow Jones.
Revenue still fell 7.8% in the display-technologies segment,
which contains the Corning, N.Y., company's LCD-TV glass
operations. The telecom segment posted 7.5% lower revenue, and
environmental technologies reported 13% lower sales.
Mr. Flaws blamed weak sales of fiber-optic materials in China
for the telecom segment's underperformance, though he said demand
for its products improved at the end of March, signaling possibly
improving results in the current quarter.
Revenue from Corning's life-sciences division increased 34%,
helped by its 2012 acquisition of Discovery Labware.
Corning's overall profit rose to $494 million, or 33 cents a
share, from $474 million, or 31 cents a share, a year earlier.
Excluding a tax-related benefit of 3 cents a share, as well as
acquisition costs and other adjustments, per-share earnings rose to
30 cents from 26 cents. Analysts polled by Thomson Reuters expected
a profit of 24 cents a share.
Net sales fell 5.5% to $1.81 billion, however, well below
analysts' $1.96 billion target. Sales were flat after adjusting for
the impact of last year's stronger Japanese yen. Corning makes and
prices a large part of its LCD glass products in yen, which have
sharply weakened in recent months.
Gross margin narrowed to 42.4% from 42.9%, though input costs
fell 4.7%.
--Ben Fox Rubin contributed to this story
Write to Drew FitzGerald at andrew.fitzgerald@dowjones.com
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