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Universal Display (OLED) Q3 Earnings & Revenues Top Estimates

Zacks Equity Research
·4 min read

Universal Display Corp. OLED reported third-quarter 2020 adjusted earnings of 85 cents per share, which increased 9% year over year and topped the Zacks Consensus Estimate by 57.4%.

Revenues increased 20.1% year over year to $117.1 million and beat the Zacks Consensus Estimate by 22.3%. Growth in revenues was driven by increasing momentum in customer orders beginning from July along with higher shipments of UniversalPHOLED. Management expects the momentum to continue into the fourth quarter.

Segment Details

Material sales (58.7% of total revenues) increased 32.5% from the year-ago quarter’s figure to $68.7 million. Green emitters sales (including yellow-green emitters) were $52.9 million, up 31.6% year over year. Red emitter sales were $15.2 million, up 33.3% year over year.

Universal Display Corporation Price, Consensus and EPS Surprise

Universal Display Corporation Price, Consensus and EPS Surprise
Universal Display Corporation Price, Consensus and EPS Surprise

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

Royalty and license fees (38% of total revenues) increased 3.6% year over year to $44.6 million. Adesis revenues came in at $3.8 million during the reported quarter compared with $2.7 million in the year-ago quarter.

Contract research services revenues (3.3% of total revenues) came in at $3.8 million, up 43.4% year over year.

Operating Details

Gross margin in the quarter under review came in at 80%, which contracted 230 basis points (bps) from the year-ago quarter’s figure. Material gross margin contracted 90 bps year over year to 69.7%.

Operating expenses of $45.3 million were up 14.9% year over year. As a percentage of revenues, operating expenses contracted 170 bps to 38.7% on a year-over-year basis.

The company reported operating income of $48.4 million indicating an improvement of 18.6% on a year over year basis. However, operating margin contracted 50 bps to 41.4% on a year-over-year basis.

Balance Sheet

As of Sep 30, 2020, Universal Display had cash and cash equivalents (including short-term investments) of $673 million compared with of $644 million as of Jun 30, 2020.

As of Sep 30, cash flow from operating activities was $75.8 million compared with $32 million reported as of Jun 30.

The company approved a quarterly cash dividend of 15 cents per share, to be paid out on Dec 31, 2020 to all shareholders of record on Dec 15, 2020.

Guidance

Universal Display expects 2020 revenues to be in the range of $385 million to $400 million.  The Zacks Consensus Estimate currently stands at $381.4 million.

The company had earlier withdrawn its guidance for 2020 due to COVID-19 related uncertainties prevailing in the market. At the end of the fourth quarter of 2019, management had anticipated fiscal 2020 revenues to be in the range of $430-$470 million. Back then, management estimated coronavirus to negatively impact revenues between $40 million and $50 million.

Further, for 2021, management expects to top line to return to growth as the OLED production shifts online along with introduction of new OLED consumer electronic models Moreover, clients are pulling forward their OLED commercialization strategies, which bodes well for the company.

Markedly, Universal Display’s products are widely used by OEMs in the consumer electronics markets like Apple AAPL, Lenovo and Samsung. 

Zacks Rank & Stocks to Consider

Currently, Universal Display carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader technology sector are Qorvo QRVO and Everbridge EVBG. While Qorvo sports a Zacks Rank #1 (Strong Buy), Everbridge carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Qorvo and Everbridge are scheduled to report earnings on Nov 4 and Nov 5, respectively.

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Apple Inc. (AAPL) : Free Stock Analysis Report
 
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