Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: tekboy who wrote (23455)	4/25/2000 10:00:00 AM
From: tekboy	Respond to of 54805

Hey, they're corning money... Briefing.com on GLW's report, which many believe will presage JDSU's report tonight... Corning (GLW) 151: It was just over a month ago on March 16 that we were writing about Corning's upside preannouncement. Today, we can write about how Corning crushed even their upwardly revised estimates. The lesson now is the same as it was a month ago -- P/E ratios are only as good as the quality of the "E", and in fast-growing sectors such as fiber optics, those Es are often substantially understated. The understatement is due both to the intentional low-balling by sell-side analysts and the failure of projections to keep pace with reality. Prior to the preannouncement, the EPS consensus for Corning was $0.48. After the preannouncement, it was $0.55. The reality was $0.64. That's a 33% upside surprise relative to preliminary estimates. Think about that next time you see a P/E that seems outrageously high or outrageously low. That unusual P/E might simply be telling you that analysts are way off-base on the E. With Corning, the blow-out E was due to its shift in focus to optical communications. Sales of its LEAF optical fiber tripled, total optical fiber rose 50%, and Photonic Technologies division sales (incl. amplifiers) rose 90%. The LEAF product was cited in the company's preannouncement, and it appears to be the key to GLW's recent good fortune. LEAF fiber is used for networks greater than 50km in length and allows for maximum DWDM capabilities. The bottom line is that demand for fiber optic equipment, and particularly equipment that maximizes bandwidth capabilities using DWDM technology, is booming. Not only did Corning easily surpass its Q1 estimates, but the company also increased guidance for the entire year from the current $2.46 consensus to $2.70-2.75 (the consensus was just $2.36 prior to March 16). Merrill Lynch has been the first firm to follow up this impressive release with an upgrade to near-term BUY from ACCUMULATE. Two lessons can be taken away from this report. First, never trust the E. It may be high or it may be low, but it is seldom correct, so healthy skepticism of forward P/E ratios is warranted. Second, the fiber optics business is exceptionally strong. That is worth noting ahead of earnings reports this afternoon from Nortel (NT) and JDS Uniphase (JDSU). Upside surprises and upward estimate revisions for the future will be the likely outcome.- Greg Jones, Briefing.com tekboy/Ares@gofibergo.com