Universal Display (OLED) Q3 Earnings Beat Despite Lower Revenues
Universal Display Corporation OLED reported mixed third-quarter 2023 results, with the bottom line beating the Zacks Consensus Estimate but the top line missing the same. The company reported lower year-over-year revenues on decreased Royalty and license fees in the quarter.
However, increasing sales of emitter materials and the rising adoption of OLED displays in electric vehicles and foldable smartphones partially supported the top line.
Net Income
Net income in the third quarter was $51.5 million or $1.08 per share compared with $53.5 million or $1.12 per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 9 cents. Lower net sales and higher operating expenses impacted the net income in the quarter.
Universal Display Corporation Price, Consensus and EPS Surprise
Universal Display Corporation price-consensus-eps-surprise-chart | Universal Display Corporation Quote
Revenues
Quarterly revenues declined to $141.1 million from $160.6 million in the year-ago quarter. Declining trends in Royalty and license fees hindered top-line growth. The top line lagged the consensus estimate by 6 million.
Material sales vertical contributed $92.5 million to revenues, up from $84.2 million in the prior-year. The top line beat our estimate of $78.9 million. Green emitter sales increased to $69 million from $64 million in the year-ago quarter, while Sales of red emitter marginally improved to $22 million from $20 million in the year-ago quarter.
Revenues from Royalty and license fees were $45.9 million compared with $71.5 million in the prior-year quarter. Cumulative catch-up adjustments and changes in customer mix impacted net sales. The top line missed our estimate of $65.2 million.
Contract research services contributed $2.6 million to revenues, down from $4.9 million in the prior-year quarter. The segment’s revenues lagged our estimate of $5.2 million.
Other Details
Quarterly gross profit declined to $106.8 million from $123.2 million in the prior-year quarter, with respective margins of 76% and 77%. Operating income stood at $48.4 million and the margin was 34% compared with the year-ago quarter’s figures of $68.5 million and 43%, respectively.
Cash Flow & Liquidity
Universal Display generated $117.7 million cash from operating activities in the first nine months of 2023 compared with $124.2 million in the year-ago period. As of Sep 30, 2023, the company had $79.3 million in cash and cash equivalents, and $61.2 million in retirement plan benefit liability.
Outlook
For 2023, management updated its revenue guidance to $565-590 million from the previously mentioned $560-600 million. The company expects gross margin to be 76-77%, with operating expenses rising year over year by a low-single-digit percentage. Capital expenditure is projected at $60 million.
The IT market is in the early stage of OLED adoption and management is optimistic about the company’s prospects across the IT industry. The company also anticipates commercial expansion in various emerging verticals, such as automotive, foldable smartphones and other advanced consumer electronics products, to gain momentum in the upcoming quarters.
Zacks Rank & Stocks to Consider
Universal Display currently carries a Zacks Rank #3 (Hold).
Model N Inc MODN, sporting a Zacks Rank #1 (Strong Buy) at present, delivered an earnings surprise of 21.26%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 45.83%.
You can see the complete list of today’s Zacks #1 Rank stocks here.
MODN provides revenue management solutions for life sciences and technology companies, including applications for configuration, price, quote, rebate management and regulatory compliance.
NVIDIA Corporation NVDA, currently sporting a Zacks Rank #1, delivered an earnings surprise of 9.79%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 29.19%.
NVIDIA is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit. Over the years, the company’s focus has evolved from PC graphics to artificial intelligence-based solutions that support high-performance computing, gaming and virtual reality platforms.
Arista Networks, Inc. ANET, presently carrying a Zacks Rank #2 (Buy), is likely to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. Arista has delivered an earnings surprise of 12%, on average, in the trailing four quarters.
ANET holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed data center segment. Arista is increasingly gaining market traction in 200 and 400-gigabit high-performance switching products and is well-positioned for healthy growth in the data-driven cloud networking business with proactive platforms and predictive operations.
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