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Corning Cracks Third-Quarter Guidance


Glassmaker forecasts lower, but is stock worth dumping?

On Wednesday I saw a headline. It read: "Corning CEO to Address Investors at Citi Investment Research Technology Conference." My first thought was, well that's good news because it'll give the New York based company a good chance to talk up its story, and perhaps give its sagging stock price a much needed boost.

But then I read the news under the headline, realized it was a Corning (GLW) release, and I just shook my head.

Very simply, the release indicated that its CEO would be attending the aforementioned conference and that while there he was going to touch on the topic of third quarter guidance. Long story short, according to the release, "Corning is lowering its third-quarter guidance for earnings per share before special items to $0.43 to $0.45*, down from the previous guidance of $0.48 to $0.51*. Sales are now expected to be in the range of $1.58 to $1.62 billion versus previously disclosed guidance of $1.65 to $1.72 billion."

In case you were wondering, that annoying little asterisk leads to a footnote, which reads as follows: "These are non-GAAP financial measures. The reconciliation between GAAP and non-GAAP measures is provided in the tables following this news release, as well as on the company's investor relations website."

The reason for the downbeat outlook: "lower-than-expected shipments of LCD glass." You know, the glass for the television sets.

In any case folks, I think this is bad news for a couple of reasons.

The first thing that comes to my mind is the question of how do we know management is on the mark with the new range? I mean the 48 to 51 cents was offered up just a month or so ago back on July 30th in conjunction with its second quarter results. How are we to be sure that a month down the line the whole ball of wax won't change again? This concerns me.

Also, think about how the Street might react. At present per Yahoo Finance, analysts are looking for 50 cents. However, I have this hunch that that's going to change in the weeks ahead as the sell side updates its models. I also think the shares could take a hit as a result.

Finally, I'd argue that this news comes at a heck of a bad time in that over the next quarter I think some shareholders will likely be pondering if they should dump the stock for a tax loss or hold out. Given this news I think the likelihood of such a shareholder dumping the stock goes up big time.

For all the Corning bulls out there I do however want to point out one interesting tidbit. A quick gander of insider transactions on Yahoo Finance reveals that John Hennessy, a former board member, purchased 49,700 shares on August 4th. Now I can't speak for the man, (and of course I'm assuming that the Yahoo data is accurate), but my assumption is that he probably wouldn't have done such a thing unless he was optimistic about the company's future. Long story short, although I think there could be some more downside in the near future, this exec seems to think that the shares are worth bellying up to.

Corning closed at $17.05, down $2.45 or 12.56%.
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No positions in stocks mentioned.

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