Corning's Q1 Earnings Crush Estimates
By Cindy Christ

Shares in Corning Inc. (GLW) surged more than 18 percent Tuesday after the fiber optic gear maker posted earnings that jumped 78 percent, beating Wall Street's heightened estimates by 9 cents a share.

Stock in the Corning, N.Y.-based firm that invented fiber optic cable 20 years ago vaulted $28 to $179 amid a glowing outlook for products used in high-speed communications networks that transmit Internet, data and voice traffic.

For the first quarter, Corning reported earnings of 64 cents a share before special items, up 78 percent from 36 cents a year ago.

Wall Street analysts had forecast a profit of 55 cents, according to First Call/Thomson Financial.

Income excluding special items totaled $178.1 million, a 93 percent improvement over 1999's $92.5 million.

First-quarter sales hit $1.35 billion versus $997 million in the same period last year, a 36 percent gain. Excluding the impact of acquisitions, sales rose 28 percent.

The company said sales of optical fiber remained strong, with overall demand increasing more than 50 percent and demand for Corning Leaf optical fiber tripling in the quarter.

Sales in the photonics division boomed 90 percent, led by demand for the company's optical amplifiers. Sales of flat -panel display glass used in computer monitors and consumer electronics grew 45 percent.

"The quarter was a home run for Corning," said Chairman and CEO Roger Ackerman in a statement. "We are reaping the benefits of our efforts to concentrate every aspect of the company on the development of new products for optical communications and other high-growth markets."

Based on the firm's strong results and unabated demand for high-bandwidth products, Ackerman projected Corning's pro forma earnings would grow about 35 percent in 2000, including announced acquisitions, and raised the firm's full-year earnings guidance to $2.75 form $2.70.

Analysts estimated per-share earnings of $2.46 in 2000 for Corning, according to First Call/Thomson Financial.

"The quarter fuels our long-held belief that the penetration of optical technology in the world's communication network has only just begun," Ackerman said.

During the quarter, Corning announced an agreement to merge with NetOptix Corp. in a $2 billion all-stock deal. The company said the merger is on track to close in mid-May.

In a conference call with analysts, Chief Financial Officer James Flaws projected revenue growth for the rest of the year of 40 percent, to $6.5 billion to $6.6 billion.

Flaws told analysts and reporters that the company would add capacity this year to help ease demand constraints.

After the report, Merrill Lynch analyst Stephen Fox boosted his rating on Corning shares to "near-term buy" from "accumulate."

"Glowing fundamentals deserve premium valuation," he wrote in a research note.

Fox said Corning's recent 35 percent decline in price offers investors an excellent entry point and boosted his 12-month price target to $200.

Josephthal, which rates Corning a "buy," lifted its price objective even higher to $240.

In a separate announcement, Corning said yesterday it would acquire the remaining equity in NZ Applied Technologies Corp. for up to $150 million in Corning common stock.

Under the deal, a significant part of the purchase price is contingent upon NZAT achieving certain product development milestones, following the completion of the transaction.

Corning took a 20 percent stake in the company in 1999.

"The rapidly growing demand for broadband communications services, such as high-speed Internet connections and on-line video, is outstripping the capacity of communications service providers," said Corning's Passive Components Business Director Jean-Louis Malinge.

According to Malinge, Corning plans to leverage NZAT's expertise in micro-optic component development to create new products used in photonic networks.