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Universal Display (OLED) Q4 Earnings: Disappointment in Store?

Zacks Equity Research

Universal Display Corporation OLED is slated to report fourth-quarter 2018 results on Feb 21.

Notably, the company has surpassed the Zacks Consensus Estimate in the two of the trailing four quarters, recording average positive surprise of 13.3%.

The company reported third-quarter 2018 earnings of 48 cents per share, which lagged the Zacks Consensus Estimate by 15 cents. However, the figure soared 71.4% from the year-ago quarter.

Revenues surged 26% to $77.6 million but missed the Zacks Consensus Estimate of $88 million.

Shares of Universal Display have shed 23.4% in the past year, compared with the industry’s decline of 11.9%.

What to Expect?

For the fourth quarter, the Zacks Consensus Estimate for earnings is pegged at 34 cents per share, indicating decline of 63.4% from the year-ago quarter.

The Zacks Consensus Estimate for revenues is projected to be approximately around $69.8 million, reflecting a year-over-year decline of 39.7%.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

Universal Display lowered outlook for fiscal 2018 anticipating softness in Organic Light Emitting Diodes (“OLED”) material sales considering near-term scenario.

It is to be noted that OLED adoption is still in very early stages and is expected to take some time to gain significant traction. Additionally, long lead times for incremental capacity addition remains a woe.

Furthermore, uncertain macroeconomic conditions and imposition of tariff owing to trade war between the United States and China is a major concern.

Lower-than-anticipated iPhone demand and weakness in overall smartphone market are likely to limit growth prospects in the near term.

Universal Display Corporation Price and EPS Surprise


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

Notably, Universal Display faces significant customer concentration, as a huge chunk of revenues come from few customers like Samsung SSNLF and LG, which is a headwind.

However, the company is expected to benefit from strength in demand across automotive end-markets.

Particularly, OLED technology produces uniform illumination over arbitrary shapes that make OLED lighting very attractive to the automobile manufacturers. Increasing adoption of OLED likely among automotive makers like BMW, Mercedes Benz and Audi is expected to create significant growth opportunities for Universal Display.

Moreover, increasing capacity of OLED in TV is anticipated to enhance order growth rate, in turn aid the company’s top line.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Universal Display has a Zacks Rank #5 (Strong Sell) and an Earnings ESP of -11.77%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks that Warrant a Look

Here are some stocks you may consider, as our proven model shows that these have the right combination of elements to post an earnings beat this quarter.

Warrior Met Coal, Inc. HCC has an Earnings ESP of +4.97% and a Zacks Rank #1. The company is slated to report fourth-quarter 2018 earnings on Feb 21. You can see the complete list of today’s Zacks #1 Rank stocks here.

Live Nation Entertainment, Inc. LYV has an Earnings ESP of +3.77% and a Zacks Rank #1. The company is scheduled to report fourth-quarter 2018 earnings on Feb 26.

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