Goldman Demotes Corning From Conviction Buy, But Supply & Demand Dynamics Remain Healthy

Goldman Sachs has removed Corning Incorporated GLW from its Conviction Buy List, as the company moves past the restocking phase of cyclical recovery in the glass market. However, the brokerage retained its Buy rating and sees 20 percent potential upside to its unchanged price target of $27.

“We remain Buy rated given a healthy supply demand balance into the holiday season and 2017, with below average supply chain inventory and rational glass pricing,” analyst Doug Clark wrote in a note.

Further, Clark still expects upside to 2017 estimates (Goldman Sachs estimated EPS at $1.75 versus the Street at $1.65) and projects glass volumes to grow at a fairly seasonal pace going forward.

The analyst is encouraged by rising panel prices, expanding TV sizes and disciplined glass pricing. Among the non-display segment, Clark sees potential catalysts in the form of Gorilla Glass for auto, wearables, double-sided glass iPhones and further M&A.

“Our 2017 glass volume growth forecast of +6 percent (vs. 5 percent in 2016) assumes a 1 percent TV unit decline and 1’’ screen size growth, which could prove conservative as both represent a deceleration vs. 2016,” Clark noted.

On the shareholder returns front, Clark expects a dividend increase in early 2017 and buybacks to continue, although the pace of buybacks will likely dissipate versus 2016.

Shares of Corning closed Tuesday’s trading at $22.58.