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Corning jumps as UBS analyst keeps "Buy" rating

October 6, 2011

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NEW YORK—Shares of glass and ceramics manufacturer Corning Inc. jumped Thursday after a UBS Investment Research analyst kept the stock at a "Buy" rating.

THE SPARK: Analyst Nikos Theodosopoulos reiterated Corning's "Buy" rating while keeping a target price of $20 on the stock, well above Wednesday's closing price of $12.60.

Theodosopoulos said the rating was due in part to Corning's announcement late Wednesday that it would buy back about $1.5 billion in its outstanding stock, and boost its dividend by 50 percent to 7.5 cents per quarter

Theodosopoulos said it was a "constructive step and should provide a wider range of natural buyers for the stock."

THE BIG PICTURE: Corning has been dogged by a weak market for its glass products, with oversupply dragging down prices.

Theodosopoulos estimated that the problem isn't going away immediately, with glass prices expected to be about 6 percent lower during the fourth quarter than the prior quarter.

The problem isn't an industry wide problem of structural oversupply, Theodosopoulos wrote. Rather, it's a short-term dip in utilization rates that can reversed if demand stays strong and dealers boost inventories as they sell out. Most of the downside has already been priced into the stock, Theodosopoulos wrote.

"Retail demand is holding up relatively well in this soft economy," Theodosopoulos wrote.

SHARE ACTION: Shares of Corning rose 90 cents, or 7.1 percent, to close at $13.50. The stock is still down sharply for the year, after hitting $23.37 a share in early February. The stock has steadily lost value since this summer as worries have mounted over a global economic slowdown. It lost about 31 percent of its value since June when it traded for $19.47.