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Dolby Laboratories (DLB) Down 5% Since Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Dolby Laboratories (DLB - Free Report) . Shares have lost about 5% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Dolby Earnings Meet, Revenues Miss Estimates in Q2
Disrupting the four straight quarters of beats, Dolby Laboratories, Inc.’s adjusted earnings of $0.47 per share were on par with the Zacks Consensus Estimate in second-quarter fiscal 2017. The company’s non-GAAP earnings were down 23.2% to $0.63 on a year-over-year basis. A rise in operating expenses, interest expense, higher cost of revenues and a lackluster top-line performance proved to be a drag.
Inside the Headlines
Total revenue of $267.4 million fell short of the Zacks Consensus Estimate of $276 million and was down 2.5% on a year-over-year basis. The top line suffered mainly on account of the fact that a portion of revenues, which were expected in the fiscal second quarter, will be generated in the next quarter.
The company’s Licensing revenues were down 3.1% to $241.6 million year over year. Consumer Electronics showed marginal improvement, driven by higher revenues from DMA and home theater equipment. However, the other three sub-businesses of licensing, namely, Broadcasting, PC and Mobile Licensing, gave a drab performance, thus weighing on overall revenues at this segment.
Licensing in “other markets” was up slightly in the reported quarter on the back of decent performance by Dolby Cinema. However, lower recoveries largely offset the improvement, thus thwarting growth.
In the fiscal second quarter, Product revenues came in at $20.7 million, up 3% on a year-over-year basis. Further, the Services segment witnessed year-over-year growth of 4.1% to $5.1 million. These segments continue to benefit from the increased number of clients interested in revamping theaters ahead of big releases.
Liquidity
As of Mar 31, 2017, Dolby had cash and cash equivalents of approximately $532.5 million, up from $516.1 million as of Sep 30, 2016. In addition, net cash provided by operating activities came in at $155.3 million, marginally down from the year-ago tally of $156.9 million.
Dividend
The company announced a cash dividend of $0.14 per share of Class An and Class B common stock, that will be payable on May 16, 2017, to shareholders of record as of May 8, 2017.
Guidance
Concurrent with the earnings release, Dolby issued the guidance for third-quarter fiscal 2017 earnings and revenues. The company estimates non-GAAP earnings in the range of $0.75–$0.81, while revenues for are estimated within $290–$305 million. Moreover, the company projects non-GAAP gross margin in the 89–90% band. Similarly, operating expenses are likely to be between $158 million and $162 million, on a non-GAAP basis.
Dolby tweaked its guidance for fiscal 2017. Currently, the company foresees total revenues in the range of $1.06–$1.10 billion from the earlier range of $1.06–$1.09 billion. While revenue initiatives, such as Dolby Cinema, Dolby Voice and consumer imaging programs are expected to fuel growth, declining demand for PCs, DVD, Blu-ray and home theater equipment are expected to play spoilsport. Additionally, the company expects Mobile licensing to be a key growth driver this year. The company also reiterated its non-GAAP operating expenses for fiscal 2017 at the $625–$635 million band.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. There has been one revision higher for the current quarter compared to one lower.
At this time, the stock has a subpar Growth Score of 'D', however its Momentum is doing a lot better with a 'B'. Charting a somewhat similar path, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for momentum investors than value investors.
Outlook
The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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Dolby Laboratories (DLB) Down 5% Since Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Dolby Laboratories (DLB - Free Report) . Shares have lost about 5% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Dolby Earnings Meet, Revenues Miss Estimates in Q2
Disrupting the four straight quarters of beats, Dolby Laboratories, Inc.’s adjusted earnings of $0.47 per share were on par with the Zacks Consensus Estimate in second-quarter fiscal 2017. The company’s non-GAAP earnings were down 23.2% to $0.63 on a year-over-year basis. A rise in operating expenses, interest expense, higher cost of revenues and a lackluster top-line performance proved to be a drag.
Inside the Headlines
Total revenue of $267.4 million fell short of the Zacks Consensus Estimate of $276 million and was down 2.5% on a year-over-year basis. The top line suffered mainly on account of the fact that a portion of revenues, which were expected in the fiscal second quarter, will be generated in the next quarter.
The company’s Licensing revenues were down 3.1% to $241.6 million year over year. Consumer Electronics showed marginal improvement, driven by higher revenues from DMA and home theater equipment. However, the other three sub-businesses of licensing, namely, Broadcasting, PC and Mobile Licensing, gave a drab performance, thus weighing on overall revenues at this segment.
Licensing in “other markets” was up slightly in the reported quarter on the back of decent performance by Dolby Cinema. However, lower recoveries largely offset the improvement, thus thwarting growth.
In the fiscal second quarter, Product revenues came in at $20.7 million, up 3% on a year-over-year basis. Further, the Services segment witnessed year-over-year growth of 4.1% to $5.1 million. These segments continue to benefit from the increased number of clients interested in revamping theaters ahead of big releases.
Liquidity
As of Mar 31, 2017, Dolby had cash and cash equivalents of approximately $532.5 million, up from $516.1 million as of Sep 30, 2016. In addition, net cash provided by operating activities came in at $155.3 million, marginally down from the year-ago tally of $156.9 million.
Dividend
The company announced a cash dividend of $0.14 per share of Class An and Class B common stock, that will be payable on May 16, 2017, to shareholders of record as of May 8, 2017.
Guidance
Concurrent with the earnings release, Dolby issued the guidance for third-quarter fiscal 2017 earnings and revenues. The company estimates non-GAAP earnings in the range of $0.75–$0.81, while revenues for are estimated within $290–$305 million. Moreover, the company projects non-GAAP gross margin in the 89–90% band. Similarly, operating expenses are likely to be between $158 million and $162 million, on a non-GAAP basis.
Dolby tweaked its guidance for fiscal 2017. Currently, the company foresees total revenues in the range of $1.06–$1.10 billion from the earlier range of $1.06–$1.09 billion. While revenue initiatives, such as Dolby Cinema, Dolby Voice and consumer imaging programs are expected to fuel growth, declining demand for PCs, DVD, Blu-ray and home theater equipment are expected to play spoilsport. Additionally, the company expects Mobile licensing to be a key growth driver this year. The company also reiterated its non-GAAP operating expenses for fiscal 2017 at the $625–$635 million band.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. There has been one revision higher for the current quarter compared to one lower.
Dolby Laboratories Price and Consensus
Dolby Laboratories Price and Consensus | Dolby Laboratories Quote
VGM Scores
At this time, the stock has a subpar Growth Score of 'D', however its Momentum is doing a lot better with a 'B'. Charting a somewhat similar path, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for momentum investors than value investors.
Outlook
The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.