Corning is reaping the fruits of large carrier deployments from AT&T (NYSE: T) and CenturyLink (NYSE: CTL) of FTTH in the United States, but that growth was tempered by slower-than-expected rollouts in Canada and Asia-Pacific.
Specifically, FTTH sales were softer in Canada and Asia, while sales in North America remained strong. Corning also announced a $10B capex plan over the next 4 years.
"Even though we saw growth in carrier sales it was less than expected in Canada and Asia due to timing delays of certain fiber-to-the-home projects," said Tony Tripeny, SVP and CFO for Corning, during the third-quarter earnings call.
Optical Communications sales were $747 million, up 7 percent from $698 million in the same period a year ago.
Core optical earnings were $71 million, up slightly from $70 million in the third-quarter of 2014.
"Net income was only up 1 percent versus last year, which is lower than we would normally realize with 7 percent sales growth," Tripeny said. "We expected more sales in higher margin FTTH solutions and [we] maintain cost structures in place to serve that demand."
Tripeny added that Corning purchased Samsung's fiber optics business last December, a move that deepened its presence in the Asia-Pacific market with facilities in Korea and China.
"A lower mix of high margin fiber-to-the-home meant a higher percentage of our sales growth came from lower margin businesses like our newly acquired Korean operations," Tripeny said.
Looking forward, Corning expects fourth-quarter Optical Communications sales to increase by low-to-mid single digit percentage rates over its sales in the comparable period a year ago.
Corning expects to make more acquisitions of other companies that would complement its Optical Communications division.
In addition to acquiring Samsung's fiber business, Corning acquired TR Manufacturing, a provider of fiber and copper cable/component interconnects and electro-mechanical assemblies to OEMs (original equipment manufacturers).
"I would expect most of our focus as we go forward for the next few years for M&A we'd be looking in the optical communications area," Tripeny said. "We think we can generate good synergies there and we have powerhouse machine with $3 billion in sales which gives us good opportunities to bring in companies and make them better."
From an overall financial perspective, Corning reported core sales of $2.45 billion and core earnings per share of $0.34, down from $2.58 billion and $0.37 per share, respectively, in the third quarter of 2014.
Corning's results met Wall Street analysts surveyed by Zacks Investment Research of 34 cents per share.
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