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Universal Display (OLED) Q4 Earnings Rise on Higher Revenues

Zacks Equity Research

Universal Display Corporation OLED reported fourth-quarter 2019 adjusted earnings of 56 cents per share (per ASC Topic 606 basis), which improved 40% year over year.

The Zacks Consensus Estimate was pegged at 72 cents per share.

Revenues surged 45% to $101.7 million and also outpaced the Zacks Consensus Estimate by 4.5%.

Segment Details

Material sales (59.7% of total revenues) soared 52.3% from the year-ago quarter to $60.8 million. Green emitters sales (including yellow-green emitters) were $40.2 million, up 70% year over year. Red emitter sales were $13 million, up 10% year over year.
 

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 (37.2% of total revenues) increased 46% year over year to $37.8 million.

Contract research services revenues came in at $3.2 million, representing the remaining 3.1% of total revenues. The figure declined 27.4% year over year.

Operating Details

Gross margin in the quarter under review came in at 82.1%, expanding 820 basis points (bps) from the year-ago quarter. Material gross margin expanded from the year-ago figure of 63% to 73.2%.

Operating expenses of $49 million were up 34.2% year over year. As a percentage of revenues, operating expenses declined 390 bps on a year-over-year basis to 48.2%.

Consequently, operating margin expanded to 33.9% from the year-ago figure of 21.8%.

Balance Sheet

As of Dec 31, 2019, Universal Display had cash and cash equivalents (including short-term investments) of $646 million compared with $597.1 million as of Sep 30, 2019.

The company recently approved a quarterly cash dividend payment of 15 cents per share, to be paid out on Mar 31, 2020 to its shareholders of record on March 17.

Guidance

For 2020, Universal Display expects revenues between $430 million and $470 million. Management estimates Coronavirus to negatively impact revenues between $40 million and $50 million.

Moreover, the company expects overall 2020 material gross margins to be in the 70-75% range, consistent with the past few years.

Operating expenses are expected to increase in the range of 10-15% on a year-over-year basis.

Universal Display expects the installed base of OLED square meter capacity to increase by approximately 50% over the next two years, which will improve revenue opportunities for the company.

Zacks Rank & Stocks to Consider

Currently, Universal Display has a Zacks Rank #3 (Hold). Virtusa Corporation VRTU, Microsoft MSFT and SAP SE SAP are some better-ranked stocks in the broader computer & technology sector, 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 rate for Virtusa, Microsoft and SAP is currently pegged at 18%, 13.2% and 9.6%, respectively.



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