If you want to get a read on consumer spending, you gotta know where to look.
I believe that direct gadget designers like Garmin (Nasdaq: GRMN) or computer system builders in the Dell (Nasdaq: DELL) mold are less useful as market barometers than tech suppliers further down the food chain. You'd have to weigh Dell's results against those of Hewlett-Packard (NYSE: HPQ), Lenovo, and Apple (Nasdaq: AAPL), as well as a slew of smaller players, to get an idea of sector strengths versus exceptional performance from individual companies.
That's why I like glass-panel manufacturer Corning (NYSE: GLW). As a world-leading supplier of materials that go into LCD screens, Corning will do well when consumer demand for anything with a digital screen is on the rise, almost regardless of which gadget brand happens to be in vogue.
So when Corning reported massively improved second-quarter results this morning, tech investors had to sit up and take notice. The company has restarted much of the glass manufacturing capacity it had put in storage in recent quarters, kick-starting net sales with a 41% sequential jump to $1.4 billion. Non-GAAP earnings nearly quadrupled to $0.39 per share. Sure, shares are down this morning, most likely because Corning failed to give precise top- and bottom-line estimates for the business. Don’t be fooled by the market’s myopia, however -- this was a great quarter.
CEO Wendell Weeks explained that "the resurgent demand for LCD glass is propelling us to restore much of our previously idled production capacity as quickly as possible to meet our customers' needs." CFO James Flaws expanded on the market outlook, where full-year LCD shipment volumes are set to increase 15% over 2008 levels "due to the vitality of LCD TV sales in the first half of the year. We now estimate that total yearly volume will be around 2.3 billion square feet."
These drastic upward revisions of Corning’s volume, sales, and profits seem to contradict negative signals from the likes of Microsoft (Nasdaq: MSFT) last week. The tech-sector bull run may have legs yet, if Corning's LCD forecasts are any indication.
Copyright 2009 by United Press International.