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Universal Display (OLED) Q2 Earnings & Revenues Top Estimates

Zacks Equity Research

Universal Display Corporation OLED delivered second-quarter 2019 adjusted earnings of 92 cents per share surpassing the Zacks Consensus Estimate of 46 cents.

Revenues increased 110.7% to $118.2 million and outpaced the Zacks Consensus Estimate of $77 million.

Revenues in the reported quarter include roughly $15 million to $20 million of orders from customers located in China to mitigate the impact from U.S. and China trade-related issues.

The company adopted a new Accounting Standards Codification (ASC) 606 using full retrospective method from the first quarter of 2018.

Universal Display’s stock has returned 123.3% on a year-to-date basis, significantly outperforming the industry's growth of 22.7%.

Segment Details

Material sales (64.6% of total revenues) increased 107.3% from the year-ago quarter to $76.3 million. Green emitters sales (including yellow-green emitters) were $60.2 million, up 132.4% year over year. Red emitter sales were $16 million, up from $10.9 million reported in the year-ago quarter.

Royalty and license fees (32.9% of total revenues) increased 150.9% year over year to $38.9 million. Adesis revenues came in at $2.9 million during the reported quarter compared with $3.8 million reported in the year-ago quarter.

Contract research services represented the remaining 2.5% of total revenues, declining 23.5% year over year.

Operating Details

Gross margin during the quarter under review came in at 79.6% compared with 79.3% reported in the year-ago quarter. Material gross margin contracted to 71% compared with 75% reported in the year-ago quarter.

Operating expense during the reported quarter came in at $45.4 million compared with $33.6 million reported in the year-ago quarter.

Operating margin came in at 41.2% compared with 19.4% reported in the year-ago quarter.

Balance Sheet

As on Jun 30, 2019, Universal Display had cash and cash equivalents (including short-term investments) of $552.7 million compared with $526.6 million at the end of previous quarter.

The company generated $83.9 million as cash from operating activities during the six months ended Jun 30, 2019.

The company recently approved a quarterly cash dividend payment of 10 cents per share to be paid on Sep 30, 2019 to shareholders as on Sep 16, 2019.

Guidance

Universal Display updated guidance for fiscal 2019. The company now anticipates revenues between $370 million and $390 million, under ASC 606 (previously $345 million and $365 million). Under ASC 605, the company expects revenues to be in the range of $425 million to $435 million (previously $405 million to $425 million). The Zacks Consensus Estimate for revenues is pegged at $357.9 million.

Zacks Rank & Stocks to Consider

Currently, Universal Display has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Rosetta Stone RST, Alteryx, Inc. AYX and Nikon Corp. NINOY, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Rosetta, Alteryx and Nikon have a long-term earnings growth rate of 12.5%, 13.7% and 1%, respectively.

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