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Be Wary of Corning's Downtrend


It may be much ado about nothing, but it's not a good sign.

With all the hype and focus on smartphones in general and the iPhone (AAPL) specifically, there's been another little-noticed phenomena taking place in the consumer-electronics arena: LCD TVs are flying off the shelves at retailers worldwide.

The data for the month of September isn't in yet according to LCD glass manufacturer Corning (GLW), but the company announced on its conference call this morning some startling numbers (see also, Corning, Like Economy, Is Clawing Its Way Back). As you can see in the table below, demand in China is absolutely screaming, as is demand in Japan. While the numbers in the US and Europe are more subdued, an important point to remember is that they don't include data from Walmart (WMT) or Costco (COST). In the case of Costco, the company announced LCD TV unit growth of 32% and 35% in the months of August and September, respectively.

At least in China, early indications are that demand hasn't softened as we entered the fourth quarter. Sales during Golden Week -- the seven-day national holiday in early October -- were estimated to be approximately 2.6 million units. That's double the level of last year.

Investors will see the year to year growth numbers remain very strong in the fourth quarter, if for no other reason than the weakness we saw last year as demand literally fell off the cliff. Consequently, Corning isn't attracting much buying interest today after reporting good numbers that easily beat the street consensus.

Positive expectations were built into the stock by way of the results from some of its customers. What may be more troubling for Corning in the near term is its past declining sequential growth rate in monthly revenues at Taiwanese panel makers. Historically, its revenues ramp-up during the third quarter, and this year, it trended down. Generally, that's not a good signal and, while it may ultimately be much ado about nothing, it keeps me on the sidelines with any of the LCD-related companies.

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