Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of glass giant Corning (NYS: GLW) were getting shattered by Mr. Market today as they fell as much as 11% in intraday trading, after the company reported fourth-quarter results.
So what: For the final quarter of the year, Corning's total sales came in at $1.9 billion, a 7% increase from the fourth quarter of 2010. Earnings, meanwhile, dropped 28% year over year on an adjusted, per-share basis. However, that adjusted, per-share earnings tally of $0.33 met analysts' expectations, so that was actually part of the good news.
As for the bad news? The fourth quarter was a rough one for Corning's LCD-glass business, and while sales were actually up from a year ago, falling prices took a hatchet to profitability. At the same time, the company's venture with Dow Chemical (NYS: DOW) -- Dow Corning -- faced major challenges in the solar-panel market.
Now what: Here's the line from the company's press release that should be front-and-center on Corning investors' radar screens today: "The display industry is in a period of transition and we are in the process of resetting expectations for its future growth and profitability."
This isn't a reason to sell first and ask questions later, but it is a very real concern for shareholders. As the press release outlines, Corning's big challenge in the coming quarters will be to cut back capacity and hope that global supply and demand rebalance and allow pricing to recover. The market for LCD glass is certainly not going away -- in fact, it'll keep right on growing -- but investors in Corning will need to assess just how profitable that market will be for the company going forward.
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