Morgan Stanley Upgrades Corning, Projects Multiple Earnings Growth Drivers

With the stock down 14 percent year-to-date, one analyst said Thursday that Corning Incorporated GLW may have more long-term earnings power than the market realizes.

The Analyst

Morgan Stanley analyst James Faucette upgraded Corning from Equal-Weight to Overweight and raised the price target from $33 to $34.

The Thesis

Display concerns are overdone — and Corning has multiple paths to earnings growth in the years ahead, Faucette said in a Thursday note. Corning has the potential to generate $3 in EPS in the years ahead, the analyst said. (See Faucette's track record here.) 

“While time to payoff prevented us from stepping in during the early days, we think there will be demonstrated traction in one, if not multiple, categories of investment in the coming years,” Faucette said. They include automotive, double-sided glass phones, Valor glass and glass participate filters, he said. 

These opportunities could generate a combined incremental EBITDA of more than $1 billion and add as much as 80 cents in EPS for Corning, Faucette said. 

The display and optical markets are strong and stable enough to limit potential downside, the analyst said. 

Investors have expressed doubts about the display business in light of the deterioration of panel pricing. Corning’s display business is solid given the supply-demand balance in the market; Corning’s cost advantage over competitors; and Corning’s dominant share in the healthiest areas of the market, Faucette said. 

Corning’s cash flow will provide the company with near-term flexibility and the opportunity to expand its capital allocation plan, the analyst said.

Price Action

Corning stock was up 3.4 percent on Thursday following the upgrade.

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Photo courtesy of Corning.