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Universal Display (OLED) Q4 Earnings Beat, Revenues In Line

Zacks Equity Research

Universal Display Corporation OLED delivered fourth-quarter 2018 adjusted earnings of 40 cents per share surpassing the Zacks Consensus Estimate of 34 cents.

Revenues decreased 39.6% to $70.1 million and almost matched the Zacks Consensus Estimate of $70 million.

The company adopted a new Accounting Standards Codification ("ASC") 606 using full retrospective method from the first quarter of 2018. Per the new accounting standards, Universal Display now reports license fee revenues on a per gram sales basis. Under the transition method, the company applied “standard only to contracts that were not complete at the initial adoption date.”

Universal Display Corporation Revenue (Quarterly)

 

Universal Display Corporation Revenue (Quarterly) | Universal Display Corporation Quote

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Segment Details

Material sales (56.8% of total revenues) decreased 33.2% from the year-ago quarter to $38.9 million. Green emitters sales (including yellow-green emitters) were $27.5 million, down 32.8% year over year. Red emitter sales were $11.8 million, down 35.5% from the year-ago quarter.

Royalty and license fees (36.9% of total revenues) declined 51.8% year over year to $25.9 million. Adesis revenues came in at $4.4 million during the reported quarter compared with $2.3 million reported in the year-ago quarter.

Operating Details

GAAP Gross margin during the quarter under review came in at 73.9% compared with 85.4% reported in the year-ago quarter. Material gross margin contracted to 63% as compared to 74% reported in the year-ago quarter.

Operating expense during the reported quarter came in at $36.5 million compared with $41.1 million reported in the year-ago quarter.

GAAP operating margin came in at 21.8% as compared with 49.9% reported in the year-ago quarter.

Balance Sheet

As on Dec 31, 2018, Universal Display had cash and cash equivalents (including short-term investments) of $515.3 million compared with $493.6 million at the end of previous quarter.

The company generated $121.8 million as cash from operating activities for 12 months ended Dec 31, 2018.

The company recently approved a quarterly cash dividend payment of 10 cents per share (an increase of 4 cents from the previous quarter) to be paid on Mar 29, 2019 to shareholders as on Mar 15, 2019.

Guidance

Universal Display provided guidance for fiscal 2019. The company anticipates revenues between $325 million and $350 million under ASC 606. Under ASC 605, the company expects revenues to be in the range of $395 million to $420 million. The Zacks Consensus Estimate for revenues is pegged at $323.7 million.

Stocks to Consider

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

Some better-ranked stocks in the broader technology sector are Symantec Corporation SYMC, salesforce.com, inc. CRM and Fortinet, Inc. FTNT, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Symantec, salesforce and Fortinet have a long-term earnings growth rate of 7.9%, 24.2% and 16.8%, respectively.

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