Docstoc

GLW - PDF

Document Sample
GLW - PDF Powered By Docstoc
					                                                                                          Company Report
                                                                                          November 28, 2012




  Corning Inc.                                                                            Buy
  Raising Estimates to Reflect Updated Guidance and Close of                              GLW
  BD Acquisition                                                                          Price: Last $12.13
  Our Call                                                                                Price Target $16.00
  We are raising estimates after Corning updated guidance to reflect better than
  expected retail glass volumes, strong Gorilla Glass demand, and better than
                                                                                          LED Supply Chain &
  expected gross margins. Also, the company recently announced the close of the
                                                                                          Semiconductors
  Becton Dickinson Discovery Labware acquisition.
                                                                                          Andrew Huang
  UPDATED GUIDANCE. Corning sees improved demand for Gorilla Glass driven
                                                                                          (415) 362-6143
  by product introductions and increased demand in the supply chain. 2012 Gorilla         ahuang@sterneagee.com
  Glass sales are expected to approach $1 billion. The company also noted better than
  expected retail glass demand in China and North America and sees a low-single           John Shen
                                                                                          (415) 402-6052
  digit increase in glass market volumes (previous forecast of a low/mid-single digit
                                                                                          jshen@sterneagee.com
  decline in glass market volumes). While the company still expects pricing declines
  in the December quarter to be slightly higher Q/Q, pricing declines are expected
  to return to moderate in the March quarter.                                             Company Data
                                                                                          Rating                                   Buy
  BD ACQUISITION CLOSE. Corning announced the completion of the Discovery                 Price: Last                            $12.13
  Labware business from BD earlier this month. While the acquisition may add              Price Target                           $16.00
                                                                                          52-Week Range                 $10.62 - $15.04
  integration risk as Corning combines Discovery's Labware's four main units              Market Capitalization (M)          $18,413.3
  (Plastic consumable labware, liquid-handling products, cell-based assays and            Shares Outstanding (M)                1,477.8
  cell cultureware, ADME research) with the Corning Life Sciences business, we            Avg. Daily Vol. (000)               13,757.6
  believe this risk is limited given the products complement and enhance its existing     Dividend                                $0.36
                                                                                          Dividend Yield                          3.0%
  portfolio of life sciences products. The BD business generates around $235 million      Assets (M)                         $27,848.0
  in revenue and the acquisition should help to drive the Life Sciences segment to
  its $1 billion revenue target by 2014. Corning expects the acquisition to be slightly   Revenue ($M) 2011A 2012E 2013E
  accretive in 2013 and $0.05 accretive in 2016. Also, because the BD business has        FY                7,890.0   7,917.9     8,530.5
  low volatility and low capital intensity, we expect the business will generate strong    (Prev)              -      7,853.4     8,316.9
  free cash flow, similar to the existing Life Sciences segment.
  RAISING ESTIMATES. Our estimates for the Display Technologies segment
  increase to $740 from $725 million for the Dec quarter driven by better glass
  volumes. Our estimates for the Specialty Materials segment increase to $381 from
  $363 million for the Dec quarter driven by strong Gorilla Glass sales. Our estimates
  for the Life Sciences segment increase to $178 from $147 million for the Dec
  quarter driven by the BD acquisition. Our estimates for Dow Corning equity
  earnings go to down 20% Q/Q from down 5% Q/Q driven by weakening demand
  for polysilicon. Our estimates for the Telecommunications and Environmental
  segments remain unchanged. Our gross margins estimate goes to flat Q/Q in the
  Dec quarter (previous guidance of down around 1% Q/Q). Our total revenue
  estimates go from $7.85 billion and $8.32 billion to $7.92 billion and $8.53 billion
  for 2012 and 2013, respectively. Our EPS estimates go from $1.24 and $1.41 to
  $1.26 and $1.44 billion for 2012 and 2013, respectively.
                                                                                          Price Performance
  FYE Dec                     2011A       2012E       2012E       2013E      2013E            20

                              (Curr)      (Prev)      (Curr)      (Prev)     (Curr)           18
  EPS ($)                                                                                     16
  Q1 (Mar)                      0.47                   0.30A       0.31        0.33
                                                                                              14
  Q2 (Jun)                      0.47                   0.31A                   0.36
                                                                                              12
  Q3 (Sept)                     0.48                   0.34A                   0.38
  Q4 (Dec)                      0.38        0.29        0.31       0.36        0.37           10
                                                                                              Nov-11   Feb-12  May-12   Aug-12     Nov-12
  FY EPS                        1.81        1.24        1.26       1.41        1.44               Corning Inc.
  P/E                           6.7x                    9.6x                   8.4x               NASDAQ Composite Index (COMP)

                                                                                          Source: FactSet

   Important Disclosures regarding Price Target Risks, Valuation Methodology, Regulation Analyst Certification,
Investment Banking, Ratings Definitions, and potential conflicts of interest begin on Page I of the Appendix Section.
                    800 Shades Creek ParkwaySuite 700Birmingham, AL 35209205-949-3500
                                  Sterne, Agee & Leach Inc. is Member NYSE, FINRA, SIPC
                                                                                                                                                                             November 28, 2012



Corning Income Statement
$ in millions, except per share data
                                                            Mar-11   Jun-11   Sep-11   Dec-11             Mar-12   Jun-12   Sep-12   Dec-12             Mar-13   Jun-13   Sep-13   Dec-13
                                                    2010       1Q       2Q       3Q       4Q      2011       1Q       2Q       3Q      4QE    2012E       1QE      2QE      3QE      4QE    2013E
Display Technologies                               3,011     $790     $760     $815     $780     3,145     $705     $641     $763     $740    2,849      $733     $733     $769     $739    2,973
Telecommunications - Fiber & Cable                   878      248      265      276      262     1,051      254      302      278      278    1,112       267      317      295      295    1,173
Telecommunications - Hardware & Equip                834      226      283      284      228     1,021      254      257      245      245    1,001       267      270      257      257    1,051
Environmental Tech - Automotive                      462      123      121      119      113       476      129      120      123      121      493       130      128      129      133      520
Environmental Tech - Diesel                          354      136      137      128      121       522      134      129      110      108      481       121      123      123      121      487
Specialty Materials                                  578      254      283      299      238     1,074      288      296      363      381    1,328       331      340      417      438    1,527
Life Sciences                                        508      144      155      153      143       595      155      162      155      178      650       193      202      212      187      794
Other                                                  7        2        1        1        2         6        1        1        1        1        4         1        1        1        1        4

Revenues                                          $6,632    $1,923   $2,005   $2,075   $1,887   $7,890    $1,920   $1,908   $2,038   $2,052   $7,918    $2,042   $2,114   $2,204   $2,170   $8,530
Cost of Goods Sold                                 3,583     1,049    1,116    1,097    1,062    4,324     1,106    1,111    1,159    1,168    4,544     1,154    1,189    1,234    1,237    4,814
Gross Profit                                       3,049       874      889      978      825    3,566       814      797      879      884    3,374       888      925      970      933    3,716

Selling, General and Administrative                1,015      250      284      238      283     1,055      279      291      294      295     1,159      286      296      309      304     1,194
Research & Development                               603      156      172      166      177       671      187      188      185      187       747      184      190      198      195       768
Amortization of Purchased Intangibles                  8        3        4        4        4        15        5        4        4        4        17        4        4        4        4        16
Other Operating Expenses                               5        0        0        5        0         5        0        0        0        0         0        0        0        0        0         0
Total Operating Expenses                           1,631      409      460      413      464     1,746      471      483      483      486     1,923      474      490      511      503     1,978
EBIT                                               1,418      465      429      565      361     1,820      343      314      396      398     1,451      415      435      459      430     1,738

Equity in Earnings of Associated Companies, net    1,958      398      428      324      321     1,471      218      265      240      216      939       184      223      225      227      858
Samsung-Corning Precision Glass                    1,473      299      325      229      178     1,031      182      193      186      177      738       150      189      191      193      724
Dow Corning                                          444       91       95       89      129       404       35       61       48       38      182        33       33       33       33      131
Other                                                 41        8        8        6       14        36        1       11        6        1       19         1        1        1        1        4

Interest Income                                       11        4        5        6        4        19        4        3        3        3        13        3        3        3        3        12
Interest Expense                                    (109)     (27)     (22)     (23)     (17)      (89)     (20)     (24)     (33)     (33)     (110)     (29)     (29)     (29)     (29)     (116)
Other Income (Expense)                               185       27       43       27       21       118       29        8        5       25        67       25       25       25       25       100
Non-Operating Income (Expense) Net                    87        4       26       10        8        48       13      (13)     (25)      (5)      (30)      (1)      (1)      (1)      (1)       (4)
Pre-Tax Income                                     3,463      862      878      899      690     3,329      574      566      611      609     2,360      597      657      683      656     2,592

Income Taxes (Credit)                               102       116      125      136       98      475       111       95       97      155      458       113      125      130      125      493
Pro Forma Net Income (Loss)                       $3,361      $748     $755     $763     $592   $2,858      $463     $471     $514     $454   $1,902      $484     $532     $553     $531   $2,100
Pro Forma EPS                                      $2.13     $0.47    $0.47    $0.48    $0.38    $1.81     $0.30    $0.31    $0.34    $0.31    $1.26     $0.33    $0.36    $0.38    $0.37    $1.44

Diluted Average Shares (millions)                  1,581     1,589    1,591    1,588    1,564    1,583     1,530    1,518    1,494    1,479    1,505     1,472    1,464    1,457    1,450    1,461
Margin Data
Gross Margin                                        46.0%    45.4%    44.3%    47.1%    43.7%    45.2%     42.4%    41.8%    43.1%    43.1%    42.6%     43.5%    43.8%    44.0%    43.0%    43.6%
SG&A                                                15.3%    13.0%    14.2%    11.5%    15.0%    13.4%     14.5%    15.3%    14.4%    14.4%    14.6%     14.0%    14.0%    14.0%    14.0%    14.0%
Research & Development                               9.1%     8.1%     8.6%     8.0%     9.4%     8.5%      9.7%     9.9%     9.1%     9.1%     9.4%      9.0%     9.0%     9.0%     9.0%     9.0%
Operating Margin                                    21.4%    24.2%    21.4%    27.2%    19.1%    23.1%     17.9%    16.5%    19.4%    19.4%    18.3%     20.3%    20.6%    20.8%    19.8%    20.4%
Pretax Margin                                       52.2%    44.8%    43.8%    43.3%    36.6%    42.2%     29.9%    29.7%    30.0%    29.7%    29.8%     29.3%    31.1%    31.0%    30.2%    30.4%
Net Margin                                          50.7%    38.9%    37.7%    36.8%    31.4%    36.2%     24.1%    24.7%    25.2%    22.1%    24.0%     23.7%    25.2%    25.1%    24.5%    24.6%
Tax Rate                                             2.9%    13.5%    14.2%    15.1%    14.2%    15.0%     19.3%    16.8%    15.9%    25.5%    19.4%     19.0%    19.0%    19.0%    19.0%    19.0%
Source: Company Reports, Sterne Agee Estimates, FactSet




                                                                                                                                                                                            Page 2
                                                                                                                       November 28, 2012


                                                       APPENDIX SECTION
Company Description:
Corning is a global, technology-based corporation that operates in four reportable business segments: Display Technologies,
Telecommunications, Environmental Technologies, and Life Sciences. Corning is a provider of high performance glass for computer
monitors, LCD televisions, and other information display applications; and optical fiber, cable, hardware, and equipment products for
the telecommunications industry. Corning and The Dow Chemical Company each own half of Dow Corning Corporation, an equity
company that manufactures silicon products worldwide.

IMPORTANT DISCLOSURES:
Regulation Analyst Certification:
I, Andrew Huang and John Shen, hereby certify the views expressed in this research report accurately reflect my personal views about
the subject security(ies) or issuer(s). I further certify that no part of my compensation was, is, or will be, directly or indirectly, related
to the specific recommendations or views expressed by me in this report.

Research Disclosures:
Sterne, Agee & Leach, Inc. makes a market in the following subject company Corning Inc.
Sterne, Agee & Leach, Inc.'s research analysts receive compensation that is based upon various factors, including Sterne, Agee & Leach,
Inc.'s total revenues, a portion of which is generated by investment banking activities.
Sterne Agee & Leach, Inc. expects to receive or intends to seek compensation for investment banking services from the subject company
and/or companies in the next three months.

Price Target Risks & Related Risk Factors:
Investment risks associated with the achievement of the price target include, but are not limited to, a company's failure to achieve
Sterne, Agee & Leach, Inc., earnings and revenue estimates; unforeseen macroeconomic and/or industry events that adversely affect
demand for a company's products or services; product obsolescence; changes in investor sentiment regarding the specific company or
industry; intense and rapidly changing competitive pressures; the continuing development of industry standards; the company's ability
to recruit and retain competent personnel; and adverse market conditions. For a complete discussion of the risk factors that could
affect the market price of a company's shares, refer to the most recent Form 10-Q or 10-K that a company has filed with the Securities
Exchange Commission.
Company Specific Risks:
Corning's Display segment customers are LCD panel and color filter makers. As they switch to larger-sized glass, the pace of their
orders may be uneven while they adjust their manufacturing processes and facilities. Additionally, consumer preferences for panels of
differing sizes, prices, or other seasonal and macroeconomic factors may lead to pauses in market growth from time to time. Emerging
material technologies could replace Corning's glass substrates for certain applications, resulting in a decline in demand for its LCD
products. Technologies for displays in competition with LCD panels may reduce or eliminate the need for Corning's glass substrate.
These technologies may include organic light-emitting diodes and plasma display panels.
Corning's Telecommunications segment customers' purchases of its products are affected by the customers' capital expansion plans,
general market and economic uncertainty, and regulatory changes, including broadband policy.
In the Environmental Technologies segment, sales of Corning's ceramic substrate and filter products for automotive and diesel emissions
and pollution control are expected to fluctuate with vehicle production. Changes in governmental laws and regulations for air quality
and emission controls may also influence future sales.
Corning faces pricing pressure in each of its leading businesses as a result of intense competition, emerging new technologies, or
overcapacity. While the company plans to work toward reducing its costs to offset pricing pressures, it may not be able to achieve
proportionate reductions in costs or to sustain its current rate of cost reduction.

Valuation Methodology:
Methodology for assigning ratings and target prices includes qualitative and quantitative factors including an assessment of industry
size, structure, business trends and overall attractiveness; management effectiveness; competition; visibility; financial condition; and
expected total return, among other factors. These factors are subject to change depending on overall economic conditions or industry
or company-specific occurrences. Sterne, Agee & Leach, Inc., analysts base valuations on a combination of forward looking earnings
multiples, price-to-revenue multiples, and enterprise-value-to-revenue ratios. Sterne, Agee & Leach, Inc., believes this accurately reflects
the strong absolute value of earnings, the strong earnings growth rate, the inherent profitability, and adjusted balance sheet factors.
Additional company-specific valuation methodology is available through Sterne, Agee & Leach, Inc.


                                                                                                             Appendix Section, Page I
                                                                                                                   November 28, 2012


Company Specific Valuation:
Our price target is $16, which is 11X our calendar 2013 EPS estimate of $1.43.

Definition of Investment Ratings:
BUY: We expect this stock to outperform the industry over the next 12 months.
NEUTRAL: We expect this stock to perform in line with the industry over the next 12 months.
UNDERPERFORM: We expect this stock to underperform the industry over the next 12 months.
RESTRICTED: Restricted list requirements preclude comment.

Ratings Distribution:
                                                                                                       IB Serv./ Past 12Mos.
Rating Category                       Count                     Percent                  Count                    Percent
Buy                                   218                       47.81%                   18                       8.26%
Neutral                               220                       48.25%                   14                       6.36%
Underperform                          18                        3.95%                    0                        0.00%

ADDITIONAL INFORMATION AVAILABLE UPON REQUEST: Contact Robert Hoehn at 1-212-338-4731.
Other Disclosures:
Opinions expressed are our present opinions only. This material is based upon information that we consider reliable, but we do not
represent that it is accurate or complete, and it should not be relied upon as such. Sterne, Agee & Leach, Inc., its affiliates, or one or
more of its officers, employees, or consultants may, at times, have long or short or options positions in the securities mentioned herein
and may act as principal or agent to buy or sell such securities.
Copyright © 2012 Sterne, Agee & Leach, Inc. All Rights Reserved.




To receive price charts or other disclosures on the companies mentioned in this report, please visit our website at https://
sterneagee.bluematrix.com/sellside/Disclosures.action or contact Sterne, Agee & Leach, Inc. toll-free at (800) 240-1438 or
(205) 949-3689.




                                                                                                         Appendix Section, Page II
                       Founded in 1901, Sterne Agee has been providing investors like you with high-quality investment opportunities for over a century. During the
                       early years, our founders prominently established themselves in the financial securities industry in the southeastern United States. Today, we
                       have expanded to serve all regions of the country. Sterne, Agee is headquartered in Birmingham, Alabama with offices in 22 states. Sterne
                       Agee is one of the largest independent firms in the country. Sterne, Agee & Leach, Inc. is a division of Sterne Agee Group, Inc., which also
                       includes The Trust Company of Sterne, Agee & Leach, Inc.; Sterne Agee Asset Management, Inc.; Sterne Agee Clearing, Inc.; and Sterne Agee
                       Financial Services, Inc.—www.sterneagee.com

                                                              EQUITY CAPITAL MARKETS
                                         Ryan Medo             Managing Dir., Eq. Cap. Mkts.              (205) 949-3623


                      INSTITUTIONAL SALES                                                                     INSTITUTIONAL TRADING
William Jump       Director of Institutional Sales            (404) 814-3960           JT Cacciabaudo        Head of Trading                           (212) 763-8288
Jon Schenk         Assoc. Director of Inst. Sales             (212) 763-8221

                                                                    EQUITY RESEARCH
                                         Robert Hoehn           Director of Research                      (212) 338-4731
CONSUMER                                                                               INDUSTRIALS
 Interactive Entertainment / Internet                                                    Aerospace & Defense
  Arvind Bhatia, CFA                   Mng. Dir.              (214) 702-4001              Peter Arment                         Mng. Dir.               (646) 376-5336
  Brett Strauser                       VP, Analyst            (214) 702-4009              Josh W. Sullivan                     Sr. Analyst             (646) 376-5337

  Footwear & Apparel
                                                                                          Auto, Auto Parts and Auto Retailers
  Sam Poser                            Mng. Dir.              (212) 763-8226
                                                                                          Michael P. Ward, CFA                 Mng. Dir.               (646) 376-5375
  Ben Shamsian                         Analyst                (212) 338-4721

  Leisure & Entertainment                                                                 Coal, Metals & Mining, Engineering & Construction
  David Bain                           Mng. Dir.              (949) 721-6651              Michael S. Dudas, CFA                Mng. Dir.               (646) 376-5329
                                                                                          Satyadeep Jain, CFA                  Analyst                 (646) 376-5357
  Restaurants                                                                             Patrick Uotila, CPA                  Analyst                 (646) 376-5358
  Lynne Collier                        Mng. Dir.              (214) 702-4045
                                                                                          Construction Materials & Diversified Industrials
ENERGY                                                                                    Todd Vencil, CFA                     SVP, Sr. Analyst       (804) 282-7385
  Exploration & Production                                                                Kevin Bennett, CFA                   VP, Analyst            (804) 282-4506
  Tim Rezvan, CFA                      Sr. Analyst            (212) 338-4736
                                                                                       HEALTHCARE
  Oilfield Services & Equipment                                                           Pharmaceutical Services
  Stephen D. Gengaro                   Mng. Dir.              (646) 376-5331              Greg T. Bolan                        Mng. Dir.              (615) 760-1469
  Grant Fox                            Analyst                (212) 338-4723              Himanshu Rastogi, PhD, CFA           VP, Analyst            (615) 760-1478
FINANCIAL SERVICES                                                                     TECHNOLOGY
  Asset Management                                                                       Data Networking and Storage
  Jason Weyeneth, CFA                  SVP, Sr. Analyst       (212) 763-8293              Alex Kurtz                           Mng. Dir                (415) 402-6015
                                                                                          Amelia Harris                        Analyst                 (415) 402-6018
  Banks & Thrifts
  Matthew Kelley                       Mng. Dir.              (207) 699-5800              Financial Technology
  Matthew Breese                       Analyst                (207) 699-5800              Greg Smith                           Mng. Dir                (818) 615-2029
  Brett Rabatin, CFA                   Mng. Dir.              (615) 760-1466              Jennifer Dugan                       Analyst                 (415) 402-6051
  Kenneth James                        VP, Sr. Analyst        (615) 760-1474
  Peyton Green                         Mng. Dir.              (877) 492-2663              Hardware, Mobile Devices, IT Supply Chain
  Zachary Wollam                       VP, Analyst            (615) 760-1468              Shaw Wu                               SVP, Sr. Analyst       (415) 362-7431
  Todd L. Hagerman                     Mng. Dir.              (212) 338-4744
  Robert Greene                        VP, Analyst            (212) 763-8296              LED Supply Chain
                                                                                          Andrew Huang                         Mng. Dir.               (415) 362-6143
  Life Insurance                                                                          John Shen                            Analyst                 (415) 402-6052
  John M. Nadel                        Mng. Dir.              (212) 338-4717
  Alex Levine                          Analyst                (212) 338-4748              Semiconductors
                                                                                          Vijay Rakesh                         Mng. Dir.               (312) 525-8431
  Mortgage Finance & Specialty Finance
  Henry J. Coffey, Jr., CFA            Mng. Dir.              (615) 760-1472           TRANSPORTATION, SERVICES & EQUIPMENT
  Jason Weaver, CFA                    VP, Sr. Analyst        (615) 760-1475              Jeffrey A. Kauffman                  Mng. Dir.               (212) 338-4765
  Calvin Hotrum                        Analyst                (615) 760-1476              Sal Vitale                           VP, Sr. Analyst         (212) 338-4766
                                                                                          Ryan Mueller                         Analyst                 (212) 338-4732
  Property/Casualty Insurance
  Dan Farrell                          Mng. Dir.              (212) 338-4782
  Nitin Chhabra, FCAS                  Analyst                (212) 338-4779




Email Address for Sterne Agee Employees: first initial + last name@sterneagee.com (e.g., jsmith@sterneagee.com)

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:1434
posted:11/28/2012
language:
pages:5