Corning Inc Earnings - Q1 2025 Analysis
Positives
- Sales growth of 106% YoY in Q1.
- EPS grew more than three times the rate of sales to $0.54.
- Sales grew 13% YoY to $3.7 billion in Q1, EPS grew 42% to $0.54, and operating margin expanded by 250 bps to 18%.
- Enterprise sales were $705 million in Q1, up 106% YoY driven by continued strong demand for new GenAI products for inside the data center.
- The company exceeded its guidance on both sales and EPS in Q1 and continued to deliver strong sales growth while improving its return profile.
Q&A Highlights - Q1 2025
Analyst asked about the company's progress in key markets, specifically solar, auto, and optical.
Wendell P. Weeks responded that the company has been successful in passing cost increases to customers in the form of price increases, such as in the recovery from the pandemic. He also mentioned that the company is seeing increased customer interest in US-sourced solar, which could lead to increased realized prices in that business. Additionally, the company's product sets in opto are primarily driven by unique products, and they have not been exposed to tariff friction costs. He also mentioned that the company feels good about its ability to mitigate any impact that comes its way, and that its footprint naturally reduces its exposure to changing tariff structures.
Analyst asked about the sensitivity of the company's solar plan to macroeconomic factors.
Edward A. Schlesinger responded that the need for energy is somewhat insulated from the macro, and that the company is seeing an increase in demand for US-sourced solar, which is insulated from the macro as well. He also mentioned that the company has long-term supply agreements with take-or-pay provisions, which provide stability and predictability. He concluded by stating that the company feels good about the growth trajectory of its solar business and does not expect the macro environment to have a significant impact on it.
Analyst asked about the company's view of the display market and its customers' demand for end-market products, particularly in the television industry.
The company expects units for the year to be flat, around 207 million. They expect growth in the glass market, driven by screen size increasing by an inch. They have not heard anything that would change their view of the end-market demand at this point in time.
Analyst asked about the company's reported Q1 results and their outlook for flattish volume of shipments, and whether it implies a significant uptick starting in Q2.
The company reported price movements in Q1 in conjunction with a move to the new core rate to maintain profitability in US dollars. On the volume side, Q1 panel maker utilization was higher than expected, possibly due to some buildup ahead of trade actions. The company has reflected in their Q2 guide that panel maker utilization would fall towards the end of the quarter to correct for any movement in the supply chain. The company sees glass supply and demand in balance and relatively tight, and does not see any reason to raise their forecast for television unit demand. They assume that the market will even itself out and their growth will be primarily driven through diagonal growth.
Analyst asked about Corning's approach to buybacks and why they are not being more aggressive with them.
Corning has been buying back shares since the second quarter of 2022, and they plan to continue doing so. They want to maintain a strong balance sheet and return cash to shareholders through buybacks.
Analyst asked about Corning's approach to tariffs and how they are impacting their customers.
Corning tries to capture the impact of tariffs on their customers in their overall risk adjustments, as it is difficult to predict sector-by-sector and customer-by-customer exactly how their tariff profile will look. Instead, they try to put all that into their risk adjustments and capture that in total, and then how that would impact their demand scenarios.
Analyst asked about the impact of a customer moving their production from China to India on Corning.
Corning has already established channels and production facilities in India to support customer moves to different regions. The company has similar arrangements with long-standing partners in Vietnam. Corning prepares for such shifts in advance and is already positioned to supply products to customers in either India or China.
