Corning (GLW) shares are modestly higher today after RBC Capital’s Mark Sue today raised his rating on the maker of LCD display glass to Outperform from Sector Perform. His price target goes to $26 from $30. “In our view, the demand outlook for Corning’s display glass continues to strengthen, driven by increased global penetration and the move toward larger screen sizes,” he writes.

Sue says checks indicate “healthy” retail sales for flat panel TVs in the U.S., Japan, China and Western Europe. He thinks Corning may be running at full capacity. “Demand continues to outstrip supply, and Corning’s production discipline points to high utilization rates by customers,” he says.

Sue thinks Q1 results, due April 21, will show revenue close to his Street-high estimate of $1.61 billion. (The consensus is $1.59 billion.) He increased his EPS estimate for the quarter today to 43 cents from 41 cents; the Street sees 42 cents.

Adding some fuel to the bull case; AU Optronics (AUO), maker of LCD panels, this morning reported March sales of 47.06 billion New Taiwanese dollars, up from 42.47 billion in February. Jefferies & Co.’s Brian White notes that the results equate to better-than-expected March quarter results. White notes that AU Optronics is Corning’s largest customer; the positive report has obvious implications for GLW’s own results.

Corning today is up 28 cents, or 1.1%, to $26.11. AU Optronis is up 19 cents, or 1.1%, to $18.25.