×

Corning's quarterly revenue rises 6.5% on strong demand for Gorilla Glass

  • Corning said profit in the first half of 2018 would be weighed down by higher investments,
  • The forecast overshadowed its seventh-straight quarter of adjusted profit beat.
  • The company's shares tumbled after the profit warning.
A still image from a Corning Gorilla Glass 4 promo video
Source: Corning
A still image from a Corning Gorilla Glass 4 promo video

Gorilla glass and optical fiber maker Corning on Tuesday said profit in the first half of 2018 would be weighed down by higher investments, overshadowing its seventh straight quarter of adjusted profit beat.

The company's shares, which rose 2 percent premarket after the report, reversed course to fall nearly 7.5 percent to $31.69 after the profit warning.

Corning is investing heavily to shore up capacity to meet rising demand for its Gorilla glass from mobile phone makers and building up its fiber-optic business that caters to telecom companies looking to deploy 5G network.

New York-based Corning expects to spend slightly more than $2 billion in 2018 to ramp up production.

"Currently, we have 23 projects underway, including construction of 11 new plants," Chief Executive Wendell Weeks said on a call with analysts.

"These investments dampened our profitability in the second half of 2017 and will do so again in the first half of 2018."

GBH Insights analyst Daniel Ives said the company's downbeat profit outlook neutralized solid quarterly results.

Corning, which also took a one-time $1.8 billion charge in the quarter due to the U.S. tax code overhaul, expects the investments to yield results in the second half of the year.

Telecom companies across the world are racing to build the high-speed 5G network and demand for fiber optic is set to surge as it forms the backbone of the new network.

Wireless operators will invest as much as $275 billion in the United States alone over seven years as they build out 5G, according to an estimate by Accenture.

Profit from Corning's optical communications business, which makes fiber optic cables and accounts for nearly a third of its revenue, climbed 13 percent to $928 million in the fourth quarter.

Corning is also benefiting from higher demand for Gorilla Glass as handset makers increasingly switch to using glass on the front and back of the devices.

Net sales from Corning's specialty materials unit, which makes Gorilla Glass, jumped 17 percent to $393 million.

The company reported core earnings of 49 cents per share, beating the average analyst estimate of 47 cents, according to Thomson Reuters I/B/E/S.

Adjusted revenue rose 7 percent to $2.74 billion, beating the average analyst estimate of $2.65 billion.

The company reported a net loss of $1.41 billion, or $1.66 per share, in the quarter ended Dec 31, compared with a profit of $1.57 billion, or $1.47 per share, a year earlier.

Net sales rose 6.5 percent to $2.64 billion.