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Universal Display (OLED) Q4 Earnings Beat, '18 View Sluggish

Universal Display Corporation OLED delivered fourth-quarter 2017 adjusted earnings of 93 cents per share, which beat the Zacks Consensus Estimate by 11 cents. The figure surged 69.1% from the year-ago quarter.

Including the effects of the Tax Cuts and Jobs Act income tax expense amounted to $11.5 million, while GAAP earnings were 55 cents per share.

Revenues jumped 55.4% to $115.9 million outpaced the Zacks Consensus Estimate of $97.7 million.

Following the results shares plunged more than 15% on Feb 23, only to recover slightly in the next trading session (Feb 26). The massive decline can be attributed to weak guidance. Universal Display expects sluggish industry growth in 2018, which will negatively impacted the top line. The company expects industry growth to resume in 2019 (estimates to increase 50% as compared with 2018).

Shares have returned 55.1% in the past year, much better than 25.5% rally of the industry.

 



Segment Details

Material sales (51.6% of total revenues) soared 104.6% from the year-ago quarter to $59.8 million. Green emitters sales (including yellow-green emitters) were $40.9 million, up 109% year over year. Red emitter sales were $18.3 million, up 135% from the year-ago quarter.
 

Universal Display Corporation Price, Consensus and EPS Surprise

 

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

 

Management stated that some pull-in activity from the current quarter resulted in additional sales of $15-$20 million of phosphorescent emitters in the reported quarter. This is likely to hurt first-quarter 2018 top-line growth.

Royalty and license fees (46.4% of total revenues) increased 23.5% year over year to $53.8 million. Contract research services (2% of total revenues) were up 27.7% to $2.3 million.

Operating Details

GAAP Gross margin contracted 240 basis points (bps) on a year-over-year basis to 85.4%. Material gross margin expanded 220 bps on a year-over-year basis to 74.1%.

Research and development (R&D) expenses and selling, general and administrative (SG&A) expenses as a percentage of revenues of declined 200 bps and 50 bps, respectively. Patent costs as percentage of revenues also declined 70 bps on a year-over-year basis.

As a result operating expenses as percentage of revenues declined 580 bps to 35.4%.

GAAP operating margin expanded 330 bps on a year-over-year basis to 50%.

Guidance

For 2018, Universal Display expects revenues between $350 million and $380 million. The guidance reflects a softer first quarter 2018 outlook, with growth expected to pick up in the second half of the year.

Materials business is anticipated to be stronger in the second half of the year.

Management expects overall material gross margins in the 70-75% range. Gross margin is also projected between 70% and 75%.

Operating expenses (including R&D, SG&A and Patent costs) are expected to increase in the range of 10-15%, primarily due to higher R&D costs.

Stocks to Consider

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

Better-ranked stocks in the broader technology sector are NVIDIA NVDA, Lam Research LRCX and ZAGG ZAGG, all  sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for NVIDIA, Lam Research and ZAGG is projected to be 10.25%, 14.85% and 5%, respectively.

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ZAGG Inc (ZAGG) : Free Stock Analysis Report
 
Universal Display Corporation (OLED) : Free Stock Analysis Report
 
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
 
Lam Research Corporation (LRCX) : Free Stock Analysis Report
 
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