Universal Display (OLED) Q2 Earnings Beat on Higher Revenues
Universal Display Corporation OLED reported impressive second-quarter 2023 results, with the bottom and the top line beating the respective Zacks Consensus Estimate.
The company reported higher revenues year over year, backed by higher green emitter sales and greater royalty and license fees. Strong emphasis on research and development to accelerate innovation, enhance capacity, and development of cutting-edge OLED applications boosted the top line during the quarter.
Net Income
Net income in the second quarter was $49.7 million or $1.04 per share compared with $41.5 million or 87 cents per share in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 29 cents. Top-line growth and higher interest income supported the bottom line during the quarter.
Universal Display Corporation Price, Consensus and EPS Surprise
Universal Display Corporation price-consensus-eps-surprise-chart | Universal Display Corporation Quote
Revenues
Net sales rose to $146.6 million from the year-ago quarter’s tally of $136.6 million. Growing adoption of OLED solutions and higher royalty and license fees supported the top line. The figure surpassed the consensus estimate of $125 million.
Net sales from the material sales vertical totaled $77.1 million, up from $71.9 million in the year-earlier quarter. The improvement was backed by higher sales of emitter material. Net sales beat our estimate of $64.4 million. Green emitter sales increased to $58 million from $54 million in the year-ago quarter. Sales of red emitter remained relatively flat year over year.
Royalty and license fees generated revenues of $64.4 million compared with $60.3 million in the prior-year quarter, driven by higher sales volume. The top line surpassed our estimate of $53.4 million.
The contract research services contributed $5.1 million in revenues, up from $4.4 million in the prior-year quarter. Revenues from this segment surpassed our estimate of $4 million.
Other Details
Gross profit in the second quarter was $114.4 million compared with $109.3 million in the prior-year period, with respective margins of 78% and 80%. The 2% year-over-year decline was induced by the $3.9 million expenditure for Shannon in the second quarter. Operating income improved to $58.6 million from $53.3 million in the year-earlier quarter.
Cash Flow & Liquidity
Universal Display generated $57.4 million from operating activities in the first six months compared with $86.1 million in the prior-year period. As of Jun 30, 2023, the company had $93.5 million in cash and cash equivalents and $60.7 million in retirement plan benefit liability.
Outlook
For 2023, management raised the lower range of its revenue guidance to $560-600 million from the previously estimated range of $550-$600 million. The company will continue to invest in developing next-generation OLED solutions to drive more customer value and lay the foundation to capitalize on the long-term growth potential. It is expecting to commercially launch a full suite of red, green and blue phosphorescent emissive materials in 2024.
Management anticipates that OLED adoption will gain momentum in 2024 and the introduction of power-efficient, high-performance, affordable emissive materials will open up a lot of opportunities for various OLED applications. Foldable smartphones and electronic devices are attracting consumer interest. This is another area that the company believes holds lots of possibilities for OLED applications.
Zacks Rank & Other Stocks to Consider
Universal Display currently carries a Zacks Rank #2 (Buy).
Akamai Technologies, Inc. AKAM, currently carrying a Zacks Rank #2, delivered an earnings surprise of 4.9%, on average, in the trailing four quarters. It delivered an earnings surprise of 6.06% in the last reported quarter. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Akamai is a global provider of content delivery networks and cloud infrastructure services. The company’s solutions accelerate and improve content delivery over the Internet, enabling faster response to requests for web pages, streaming of video & audio, business applications, etc. Akamai’s offerings are intended to reduce the impact of traffic congestion, bandwidth constraints and capacity limitations on customers.
Workday Inc. WDAY, sporting a Zacks Rank #1 at present, delivered an earnings surprise of 13.05%, on average, in the trailing four quarters.
Workday is a provider of enterprise-level software solutions for financial management and human resource domains. The company’s cloud-based platform combines finance and HR in a single system, which makes it easier for organizations to provide analytical insights and decision support.
Motorola Solutions, Inc. MSI, currently carrying a Zacks Rank #2, delivered an earnings surprise of 5.62%, on average, in the trailing four quarters.
The leading communications equipment manufacturer has strong market positions in bar code scanning, wireless infrastructure gear, and government communications. Motorola Solutions generally provides services and solutions to government segments and public safety programs, along with large enterprises and wireless infrastructure service providers.
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