Corning marked its 165th birthday in 2016. When you are at the helm of an institution that spans three centuries, you learn to take the long view. That means rewarding shareholders in the near term, while protecting the interests of all stakeholders long term. It means optimizing today’s businesses, while investing to create tomorrow’s growth drivers. And it means making strategic choices to ensure sustainable success and ongoing relevance in an evolving and highly competitive global marketplace.
That’s exactly what Corning’s Management Committee was doing when it laid out the company’s Strategy and Capital Allocation Framework in late 2015.
Stakeholders’ assessment of Corning’s 2016 performance will depend on their vantage point. An examination of the year’s financial results reveals core sales that were down slightly from 2015. A broader view shows a company that strengthened its industry leadership and ended the year strong. And the long view reveals strong progress toward the targets Corning said it would achieve within a four-year period.
Although 2016 was not a growth year for us, we were extremely pleased with several key achievements. We strengthened Corning’s portfolio with strategic transactions. We advanced major innovation programs. And we returned cash to shareholders through stock buybacks and a double-digit dividend increase. As we look ahead, we are confident in Corning’s ability to deliver sustainable secular growth over the long term.
2016 Financial Results
Before I review our execution against the Framework, here’s a closer look at Corning’s financial performance.
Core sales were $9.7 billion, down 1 percent from 2015, while core earnings were $1.8 billion, down approximately 6 percent year over year. However, core earnings per share of $1.55 were up 11 percent from 2015, driven by share repurchases as part of our strategy to create value for investors.
The first quarter was our weakest, driven by a combination of slow demand in some markets and a short-term execution issue. We told investors our performance would improve as the year progressed, and we delivered on that commitment with strong year-over-year growth in the second half.
- In Display Technologies, volume was up despite a maturing market for LCD televisions and lower-than-expected demand in the IT segment. Core sales were down year over year due to price declines, which exceeded volume growth. However, price declines were more moderate than in 2015, and Corning continues to lead competitors on sales and profitability by a wide margin.
- In Optical Communications, strong demand for fiber-to-the-home technology was offset by problems with a manufacturing software implementation early in the year. We resolved the issue in the second quarter and believe that the sales growth in the third and fourth quarters reflects the true strength of this segment.
- Specialty Materials sales were lower than expected due to weakness in the smartphone and tablet markets. However, the year finished strong, driven by the introduction of new products in the Corning® Gorilla® Glass family.
- In Environmental Technologies, record sales of automotive emissions-control products beat expectations and offset anticipated slow sales of products for heavy-duty applications in North America and China.
- Life Sciences sales were up, driven by growth in the bioprocess segment and in Greater China.