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Universal Display (OLED) to Post Q3 Earnings: What's in Store?

Zacks Equity Research

Universal Display Corporation OLED is slated to report third-quarter 2019 results on Oct 30.

Notably, the company surpassed the Zacks Consensus Estimate for earnings in three of the trailing four quarters, the average positive earnings surprise being 61.92%.

Which Way Are Q3 Estimates Treading?

The Zacks Consensus Estimate for third-quarter earnings is pegged at 57 cents per share, unchanged over the last 30 days. The figure indicates an improvement of 18.8% from the year-ago reported figure.

The Zacks Consensus Estimate for revenues stands at $84.73 million, suggesting growth of 9.3% from the year-ago quarter.

Upbeat Q2 Performance at a Glance

Universal Display had reported second-quarter 2019 adjusted earnings of 92 cents per share surpassing the Zacks Consensus Estimate by 100%.

Revenues improved 110.7% to $118.2 million and outpaced the Zacks Consensus Estimate by 53.7%.



Notably, shares of Universal Display have returned 88.6% on a year-to-date basis, significantly outperforming the industry's growth of 24.8%.

Let’s see how things are shaping up prior to this announcement.

Factors to Consider

Ongoing momentum in material sales, green emitter and red emitter sales are likely to have benefited Universal Display’s third-quarter results.

In the last reported quarter, Material sales soared 107.3% year over year to $76.3 million. Markedly, the Zacks Consensus Estimate for Material sales for the third quarter is currently pegged at $51 million, almost in line with the year-ago reported figure of $51.2 million.

The company’s third-quarter top-line performance is likely to reflect robust demand across end-markets, comprising smartphones, television, virtual reality (VR) devices and automotive markets.

Moreover, growing proliferation of advanced driver assisted systems (ADAS) in autonomous cars, rapid adoption of cloud, IoT, wearables, drones, virtual reality/ augmented reality (VR/AR) devices, is expected to benefit the third-quarter results.

Additionally, new OLED-based product launches from premium device makers like Apple AAPL, Huawei, Oppo, Samsung, and Vivo, and increasing capacity of OLED in TV are anticipated to have aided order growth rate and consequently the top line in the third quarter.

Further, anticipated rise in demand from South Korea and panel makers based in China is likely to have benefited the company’s third-quarter performance.

Moreover, synergies from Adesis acquisition is expected to get reflected in the third-quarter results. Notably, Adesis had contributed $2.9 million to the second-quarter top line.

Markedly, the Zacks Consensus Estimate for Contract Research Services revenues for the third quarter is currently pegged at $3.3 million, suggesting an improvement of 10.6% from the year-ago reported figure.

However, longer lead times are likely to have limited licensing revenues growth.

Notably, the Zacks Consensus Estimate for revenues from Royalty and License Fees for the third quarter is currently pegged at $27.8 million, indicating growth of 19.2% from the year-ago reported figure.
 

Universal Display Corporation Price and EPS Surprise

 

Universal Display Corporation Price and EPS Surprise

Universal Display Corporation price-eps-surprise | Universal Display Corporation Quote

Key Developments in Q3

In the quarter under review, Universal Display entered into a partnership with China-based OLED materials supplier, Eternal Material Technology Company (“EMT”).

Per the terms of the latest OLED host partnership, EMT will manufacture and sell Universal Display’s green, red and yellow host materials to select panel manufacturers based in China. However, financial terms of the deal have been kept under wraps.

The company also announced OLED host partnership with Korea-based chemical company, LG Chem, Ltd.

Moreover, the company’s R&D efforts to sustain position in OLED industry are noteworthy. The company announced partnership with Germany-based Merck KGaA, Darmstadt, to advance research in the OLED domain for development of high performance OLED stacks. These initiatives are anticipated to aid Universal Display effectively tackle the demand from panel makers.

What Our Model Says

According to the Zacks model, a company has a good chance of beating estimates if it has a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).

Although Universal Display has a Zacks Rank #2, an Earnings ESP of 0.00% makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are some stocks you may consider, as our proven model shows that these have the right combination of elements to post an earnings beat this quarter.

Advanced Energy Industries, Inc. AEIS has an Earnings ESP of +4.17% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here. The company is set to report third-quarter 2019 earnings on Nov 12.

GlaxoSmithKline plc GSK has an Earnings ESP of +3.03% and a Zacks Rank #2. The company is scheduled to report third-quarter 2019 earnings on Oct 30.

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