A month has gone by since the last earnings report for Corning (GLW Quick QuoteGLW - Free Report) . Shares have lost about 6.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Corning due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Corning Q2 Earnings Match Estimates, Revenues Beat

Corning Incorporated reported healthy second-quarter 2023 results, with the top line beating the Zacks Consensus Estimate and the bottom line matching the same.  

The New York-based advanced glass substrates producer reported lower revenues year over year, owing to sluggish demand trends in several end markets and inventory adjustments. However, positive momentum in Display Technologies and Environmental Technologies vertical, combined with management’s various initiatives to boost profitability, partially reversed the negative trend.

Net Income

Net income on a GAAP basis was $281 million or 33 cents per share compared with $563 million or 66 cents per share in the prior-year quarter. The decline was primarily attributable to year-over-year revenue contraction.

Core net income was reported at $388 million or 45 cents per share, down from $489 million or 57 cents per share in the year-ago quarter. The bottom line matched the Zacks Consensus Estimate.

Revenues

Quarterly revenues on a GAAP basis declined to $3,243 million from $3,615 million reported in the year-ago quarter. The top line was negatively affected by declining trends in the Optical Communications, Specialty Matters and Life Science segments. Core sales stood at $3,482 million, down 7% year over year from $3,762 million. The top line surpassed the consensus estimate of $3,468 million.

Segment Results

Revenues from Optical Communications were $1,066 million, down 19% from the prior-year quarter’s level of $1,313 million. The top line fell short of our revenue estimate of $1,205.6 million. The segment's net income declined to $140 million from $182 million reported in the year-ago quarter. Weak demand for passive optical network products impacted the vertical. However, productivity enhancement partially cushioned the net sales.

Display Technologies contributed $928 million in revenues, up 6% year over year. Net sales surpassed our revenue estimate of $791.5 million. Net income from the segment was $208 million compared with the prior-year quarter’s figure of $228 million. Greater volume from increased panel maker utilization drove the net sales from this vertical.

Net sales from Specialty Materials were $423 million, down 13% year over year. The top line marginally surpassed our estimate of $420 million. Despite higher Gorilla Glass sales, the persistence of low demand in end markets hindered revenue growth. Expenses associated with new product launches affected the net income from this vertical. Net income was $33 million, down from $91 million reported in the prior-year quarter.

Revenues from Environmental Technologies reported 28% year-over-year growth to $457 million. The segment’s gain was driven by healthy demand for gasoline particulate filters in China and improved productivity. Net income was $107 million, up from $62 million in the year-earlier quarter.

Life Sciences segment revenues declined to $231 million from the year-earlier quarter’s tally of $312 million. Segment net income was $11 million compared with $37 million in the year-ago quarter. The segment’s revenues were affected by decreasing demand for COVID-related products in China, combined with inventory adjustments.

Hemlock and Emerging Growth Businesses reported a 10% decline in net sales year over year to $377 million. Net income from the segment was $26 million compared with $25 million in the year-ago quarter.

Other Details

Gross profit declined to $1,013 million from $1,246 million, owing to lower revenues. Operating income totaled $279 million, down from $490 million in the year-ago quarter. Core gross margin and operating margin declined to 36.2% and 17.5%, respectively, from 37.5% and 18.8% reported in the prior year quarter.

Cash Flow & Liquidity

During the second quarter of 2023, Corning generated $619 million of net cash from operating activities compared with $758 million in the prior-year period. The company registered a free cash flow of $310 million compared with the prior year’s figure of $440 million. As of Jun 30, 2023, Corning had $1,538 million in cash in cash and cash equivalents with $7,437 million of long-term debt.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -8.21% due to these changes.

VGM Scores

Currently, Corning has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Corning has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.