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What's in Store for Universal Display (OLED) in Q2 Earnings?

Zacks Equity Research

Universal Display Corporation OLED is set to report second-quarter 2019 results on Aug 1. Notably, the company surpassed the Zacks Consensus Estimate for earnings in three of the trailing four quarters, with an average positive earnings surprise of 56.2%.

Past-Quarter Performance

Universal Display had delivered first-quarter 2019 adjusted earnings of 66 cents per share surpassing the Zacks Consensus Estimate of 26 cents.

Revenues increased 101.4% to $87.8 million and outpaced the Zacks Consensus Estimate of $61 million.

What to Expect in Q2

The Zacks Consensus Estimate for second-quarter earnings is pegged at 46 cents per share, unchanged for the last 30 days. The figure indicates an improvement of 100% from the year-ago reported figure. The Zacks Consensus Estimate for revenues stands at $76.91 billion, suggesting growth of 36.9% from the year-ago quarter.

Universal Display’s stock has returned 128.6% on a year-to-date basis, significantly outperforming the industry's growth of 25.2%.

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

Factors at Play

Universal Display’s second-quarter results are expected to benefit from strength in demand across end-markets, comprising smartphones, television, virtual reality (VR) devices and automotive markets.

Moreover, robust implementation of advanced driver assisted systems (ADAS) in autonomous cars, rapid adoption of cloud, IoT, wearables, drones, virtual reality/ augmented reality (VR/AR) devices, is expected to aid upcoming quarterly results.

Notably, the company is gaining from surge in material sales, green emitter and red emitter sales. Strong demand from South Korea and panel makers based in China favors growth prospects. This momentum is anticipated to continue in the to-be-reported quarter.

In the last reported quarter, Material sales increased 115.8% year over year. Green emitters sales (including yellow-green emitters) went up 143.3% year over year. Red emitter sales were $12.8 million, up from $8 million reported in the year-ago quarter.

The Zacks Consensus Estimate for Material sales is current pegged at $50 million.

Moreover, synergies from Adesis acquisition is expected to positively impact contract research services revenues in the to-be-reported quarter.

Moreover, new OLED-based product launches from premium handset makers like Apple AAPL, Huawei, Oppo, Samsung, and Vivo, and increasing capacity of OLED in TV are anticipated to enhance order growth rate, which in turn will aid the company’s top line in the to-be-reported quarter.

However, uncertain macroeconomic conditions and imposition of tariff owing to trade war between the United States and China remains a headwind. Further, long lead times; intensifying competition and sluggish smartphone end market are major headwinds. These factors are likely to have a negative impact on the to-reported quarter’s results.

What the Zacks Model Unveils

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. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Universal Display has a Zacks Rank #2 and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are some stocks which you may consider as our model shows that these have the right combination of elements to post an earnings beat in its upcoming release:

Lockheed Martin Corporation LMT has an Earnings ESP of +2.07% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

AmerisourceBergen Corporation ABC has an Earnings ESP of +0.82% and a Zacks Rank #3.

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