For Immediate Release
Chicago, IL – June 14, 2019 – Zacks Equity Research Universal Display Corporation (OLED - Free Report) as the Bull of the Day, Bed Bath & Beyond Inc. (BBBY - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Apple (AAPL - Free Report) , Boeing (BA - Free Report) and Intel (INTC - Free Report) .
Here is a synopsis of all four stocks:
Bull of the Day:
Universal Display Corporation shares have skyrocketed roughly 90% so far this year and its top and bottom-lines are projected to soar. The firm also operates a business that is poised to grow as the proliferation of smartphones, wearables, TVs, and virtual reality continues.
OLED & Universal Display Overview
Universal Display went public in 1996 and has slowly helped change the way consumers experience technology. The company’s ticker is also its core offering. Organic light emitting diodes, better known as OLED, create more contrast between colors on screens and have become highly valuable to many display panel manufacturers around the world. OLEDs are monolithic, solid-state devices that are made up of a series of thin organic films placed between two thin-film conductive electrodes.
There is much more to the process, but the details aren’t necessary to understand the basic idea about why OLED has become a highly sought-after technology today. In the simplest terms, OLED technology essentially creates light within all of the pixels that make up a picture. This allows it to display images without a backlight, which is why it is known as emissive tech, and how it is able to create true blacks as well as impressive color contrast. OLED also enables screens to be very thin.
Today, Apple (AAPL - Free Report) , Samsung, and Google (GOOGL) all use OLED screens in at least some of their phones, with Apple being one of the later adopters. OLED TVs have also become popular among brands like Sony (SNE) and Samsung, even though they tend to be more expensive at the moment than some of their counterparts. As we mentioned, OLED screens tend to be thinner and they are also often more flexible than other types of screens. This could help Universal Display drive forward a possible folding screen revolution.
Moving on, the Ewing, New Jersey-headquartered firm is a leader in the research, development, and commercialization of OLED tech and materials used in display and solid-state lighting applications. Universal Display breaks down its revenue into three main categories: material sales, royalty and license fees, and contract research services. Material sales made up roughly 60% of total revenue last quarter with royalty and license fees at around 35%.
Universal Display and others have also touted the energy efficiency of OLED screens, which should help make the tech more attractive going forward. Plus, Universal Display hopes to profit off the expansion of the OLED lighting market. Investors should also note that last February the firm signed a long-term OLED material supply and license agreements with Samsung Display Co. The agreement will see Universal Display continue “to supply its proprietary UniversalPHOLED phosphorescent OLED materials and technology to Samsung Display for use in its OLED displays.” The deal is set to run through calendar year 2022, and could be extended two more years.
Investors will also notice the impressive run that OLED stock has been on over the last decade. The last serval years have, however, been more up and down for Universal Display. Yet its stock is still up 47% in the past 24 months, despite a huge drop off from the beginning of 2018 to the start 2019. And, as we mentioned at the top, Universal Display stock is up roughly 86% YTD and closed regular trading Thursday at $173.88 per share.
Outlook & Earnings Trends
Before we look ahead, it is important to note that Universal Display’s full-year 2018 revenue fell roughly 26% from the previous year. This dip can be seen in the first chart above and is part of the reason for the OLED’s 2018 price decline. With this is in mind, Universal Display is coming off a first quarter of fiscal 2019 that saw its adjusted earnings skyrocket from the year-ago period to $0.66 per share, which crushed our $0.26 per share Zacks Consensus Estimate. Meanwhile, the firm’s revenues soared over 100% to $87.8 million, which also destroyed our $61 million estimate.
Looking ahead, the company’s second quarter 2019 revenue is projected to climb by 37% to reach $76.91 million, based on our current Zacks Consensus Estimate. Peeking further ahead, the company’s full-year revenue is projected to surge 44.66% to hit $357.92 million—this would easily top 2017’s $335.63 million. This growth is then expected to continue in 2020, with Universal Display’s revenue projected to climb over 31% above our 2019 estimate to $469.13 million.
At the bottom end of the income statement, OLED’s adjusted Q2 earnings are projected to skyrocket 100% to $0.46 per share. On top of that, the firm’s fiscal 2019 EPS figure is expected to surge roughly 97% to $2.44 per share. Peeking further ahead, Universal Display’s 2020 earnings are projected to jump 49% higher than our current-year projection to $3.65 per share.
Along with its impressive growth outlook, which calls for sustained top and bottom-line expansion, the company’s earnings estimate revision picture has turned far more positive recently for fiscal 2019 and 2020.
Bear of the Day:
Shares of Bed Bath & Beyond Inc. have fallen steadily since 2015. Now, amid an activist investor push, which led to its CEO Steven Temares stepping down in mid-May, the company’s earnings and revenues appear to be headed in the wrong direction.
Recent News & Overview
Bed Bath & Beyond on May 13 announced that it appointed Mary Winston interim CEO as its former chief executive walked away amid pressure from three activists—Legion Partners, Macellum Advisors, and Ancora Advisors. Then, at the end of May, the company named four new independent directors to its board in a settlement with activist investors who had pressured BBBY to make changes amid a shifting retail landscape. Investors should note that 12 of the company’s 13 directors have joined the board within the last two years.
The need for a change might have been cemented after Bed Bath & Beyond in early April reported its first annual loss and sales decline in its nearly 30 years as a public firm. BBBY saw its full-year fiscal 2018 revenue fall 2.6% to $12.03 billion. Meanwhile, the home-goods retailer posted a GAAP net loss of $1.02 per share, which included a non-cash goodwill and tradename impairments charge.
With all that said, Bed Bath & Beyond has clearly faced a hard time adjusting to an Amazon-obsessed retail age, or at least found it difficult to convince Wall Street and investors it can based on its price chart. Shares of BBBY have tumbled 80% over the last five years, compared to its industry’s 96% climb. After some initial 2019 success, Bed Bath & Beyond has seen its stock price fall 19% in the past month. BBBY stock closed regular trading hours Thursday at $12.29 per share. Plus, BBBY stock is pretty heavily shorted at the moment.
Outlook & Earnings Trends
Before we jump into what to expect from Bed Bath & Beyond in the near-term, let’s quickly look at the retail landscape as a whole. As of Wednesday, we had first-quarter results from 38 of the 39 retailers in the S&P 500. Total earnings for these companies were are up +12.2% from the same period last year on +7.9%. Despite that overall strength, department store firms from Macy’s to Nordstrom have failed to impress (also read: Taking Stock of the Earnings Picture).
Meanwhile, Bed Bath & Beyond’s first quarter fiscal 2019 revenue—which is due out on July 10—is projected to fall 6.3% to $2.58 billion, based on our current Zacks Consensus Estimate. Looking further ahead, the company’s full-year revenue is expected to sink 4.4%. Plus, the company’s 2020 revenue is expected to fall over 1% below our current-year projection in a sign of continued negativity.
Moving to the bottom end of the income statement, the company’s adjusted Q1 2019 earnings are projected to plummet 75% to $0.08 per share. Meanwhile, Bed Bath & Beyond’s full-year fiscal 2019 EPS figure is projected to slip 3.9% overall. Investors will also notice just how dramatically the company’s Q1 and fiscal 2019 and 2020 earnings estimates have fallen over the last 90 days.
Bed Bath & Beyond is currently a Zacks Rank #5 (Strong Sell), based, in large part, on its negative earnings estimate revision picture. The company could clearly make a turnaround at some point and it is worth paying attention to any signs of life the change in leadership might bring down the road.
3 Stocks to Watch During an Ongoing Trade War
With the ongoing trade war between the U.S and China, there has been increasing volatility in the stock market. The back and forth banter between President Trump and China has caused uncertainty for companies and investors, and it looks like increasing tensions between both sides has set itself in for the long haul.
With both sides reluctant to budge, companies that rely heavily on overseas revenue streams have the most to lose from the ongoing conflict. According to estimates, companies that derive more than half of their sales internationally are expected to see a 9.3% decrease in second-quarter earnings. On the other hand, companies with revenue streams from inside the U.S could see their earnings grow by 1.4% in the second quarter.
Let’s take a deeper look at some of the companies that depend on revenue streams from outside the U.S.
Apple is a company with a lot at stake during times of uncertainty with foreign countries. Apple depends on China for rare earth minerals that are used to manufacture iPhones, and China is also Apple’s third largest market. The company had 57.9% of their earnings come from outside the United States in 2017, the most recent year the company has full data available. According to S&P Dow Jones Indices and FactSet, Apple is expected to see a fall of 14.6% in quarterly earnings, as well as a 10.3% drop from the same period a year ago.
Apple is a Zacks Rank #3 (Hold), with a Style Score of B in Value. The stock has a forward P/E ratio of 16.97 as well as a PEG ratio of 1.65, which is lower than the industry average of 2.32. Apple also has a Style Score of B in Growth; it has a historical EPS growth rate of 11.61% which is much better than its industry’s average. Apple can also appeal to long term investors as it has an expected long term (3-5 years) EPS growth of 10.29%.
Boeing gets 54.7% of its proceeds from overseas, and this dependence could prove detrimental for the company, as quarterly earnings are projected to fall roughly 43% and decline 45.6% from a year ago. Nevertheless, Boeing sits at a Zacks Rank #3 (Hold), with a Styles Score of B in Growth. The company has a long term (3-5 years) expected EPS growth of 11.17% to go along with an above industry average historical EPS growth rate of 17.29%. Boeing has had its share of declines lately, including issues with its 737 MAX which had to be grounded after two fatal crashes. Amidst the speculation and fallout from the two tragic crashes, further complications from the trade war is the last thing this company needs.
Intel gets a whopping 80% of its revenues from outside of the U.S., and countries such as China, Singapore, and Taiwan bring in significant revenue for the company. The company’s earnings are estimated to decline by more than 14% from the year-ago period. Intel receives a Zacks Rank #3 (Hold) with a Style Score of B in Value. The company has forward P/E ratio of 11.04 and a PEG ratio of 1.47. Both of the company’s P/E and PEG ratios are below the industry average, making its stock price relatively cheap compared to the rest of stocks in the industry. Furthermore, Intel also has an earnings yield of 9.07% that is also above industry average, a metric that could attract value seeking investors.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
See their latest picks free >>
Zacks Investment Research
800-767-3771 ext. 9339
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.