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Corning May Be Cheap, but It’s No Value: Finerman

Thursday, 26 Jan 2012 | 7:14 PM ET

Despite its dominant niche in the gadget market, bulls may have a hard time driving Corning much higher.

Morgan Stanley downgraded Corning from ‘Equal Weight’ to ‘Underweight’ citing ‘chronic oversupply.’ They now have a $12 price target on the stock.

Also, UBS lowered their EPS estimates though they still have a buy rating on the stock.

“It’s cheap but that’s not enough. It’s been a serial disappointer. They can’t get out of their own way,” says Fast trader Karen Finerman.

Corning posted a 53 percent slump in fourth-quarter profits earlier in the week with net income falling to $491 million, or 31 cents per share, in the October-December period. That's down from $1.04 billion, or 66 cents per share, a year earlier.

Commentary from the company certainly didn’t help bulls, either. Corning said it had to lower the price of its glass used in LCD TVs due to lower demand.

“No matter how cheap it gets I can’t believe in the Corning story. They have structural problems,” adds trader Joe Terranova.

Corning's main customers for its LCD business -- manufacturers such as LG Display and Sony -- have been struggling to eke out profits in their TV units as people put off buying new flat-screen sets in a tough economy.

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Lower retail demand globally for LCD televisions led to a glut of the glass, which gave Corning's customers more muscle in demanding lower prices, Chief Financial Officer Jim Flaws says.

"The panel makers, who are unprofitable and always trying to pressure us to lower prices, had more ability to do that because they could trade off glass makers against one another," he says, "and that's what led to these more significant price declines.

Buzzkill: Corning?
Corning was downgraded to "underweight" at Morgan Stanley because of competition and chronic oversupply. So, what's the trade on the stock? The Fast Money traders, weigh in on that, and Rio Tinto's 51% stake in Invanhoe mines.

"Consumers did not want to buy higher priced TVs, which led to lower growth and excess inventory."

Flaws also says he does not expect any change in the overall glass market in the first quarter.

After Wednesday's results and downbeat commentary, analysts said they doubted Corning could see a rebound in glass prices.

"Once they have reduced prices on their own accord, they may not get the opportunity unless there is a shortage," observes Oppenheimer analyst Srinivasan Sundararajan.

CFO Flaws did say the price declines could stabilize in the second quarter.





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Trader disclosure: On Jan 26, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Terranova is long XOM; Terranova is long TRLG; Terranova is long CNX; Terranova is long SBUX; Terranova is long SNDK; Terranova is long CSCO; Terranova is long VRTS; Terranova is long LQD; Terranova is long MUB; Terranova is long EMC; Terranova is long AXP; Terranova is long F; Terranova is long JOY; Terranova is long MCD; Terranova is long OXY; Terranova is long MCD; Terranova is long OXY; Terranova is long IBM; Terranova is long SU; Terranova is long MA; Seymour is long F; Seymour is long AAPL; Seymour is long BAC; Seymour is long CIB; Najarian is long AKS; Najarian is long BAC; Najarian is long PNC; Najarian is long WFC; Najarian is long GDX; Najarian is long NFLX; Najarian is long MSFTl Najarian is long IBM; Finerman is long (JPM); Finerman is long (BAC); Finerman is long (PLCM); Finerman is long (IBM)

For Ron Insana
No Dislcosures

For Mike Khouw
No Disclosures, all holdings in separately managed accounts

For Karen Finerman
Finerman’s fund is long (AAPL)
Finerman’s fund is long (JPM)
Finerman’s fund is long (PLCM)
Finerman’s fund is short (SPY)
Finerman’s fund is short (MDY)

For Marc Riddick
No Disclosures

For Carter Worth
No Disclosures

For David Barger
No disclosures

For Richard Repetto
Sandler O'Neill expects to receive or intends to seek compensation from E*TRADE Financial Corporation for investment banking services in the next three months. As of the date of this report, Sandler O'Neill currently acts as a market maker in the securities of E*TRADE Financial Corporation. E*TRADE Financial Corporation is a client of and receives non-investment banking securities-related services from Sandler O'Neill (based on information as of the end of the month immediately preceding the date of this report). An affiliate of Sandler O'Neill has received compensation from E*TRADE Financial Corporation for providing products or services other than investment banking services in the 12-month period ending as of the last calendar quarter.

CNBC.com with wires.

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