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Why Is Universal Display (OLED) Down 1.7% Since Last Earnings Report?

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It has been about a month since the last earnings report for Universal Display Corp. (OLED - Free Report) . Shares have lost about 1.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Universal Display due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Universal Display Q2 Earnings & Revenues Surpasses Estimates

Universal Display delivered second-quarter 2019 adjusted earnings of 92 cents per share surpassing the Zacks Consensus Estimate of 46 cents.

Revenues increased 110.7% to $118.2 million and outpaced the Zacks Consensus Estimate of $77 million.

Revenues in the reported quarter include roughly $15 million to $20 million of orders from customers located in China to mitigate the impact from U.S. and China trade-related issues.

The company adopted a new Accounting Standards Codification (ASC) 606 using full retrospective method from the first quarter of 2018.

Segment Details

Material sales (64.6% of total revenues) increased 107.3% from the year-ago quarter to $76.3 million. Green emitters sales (including yellow-green emitters) were $60.2 million, up 132.4% year over year. Red emitter sales were $16 million, up from $10.9 million reported in the year-ago quarter.

Royalty and license fees (32.9% of total revenues) increased 150.9% year over year to $38.9 million. Adesis revenues came in at $2.9 million during the reported quarter compared with $3.8 million reported in the year-ago quarter.

Contract research services represented the remaining 2.5% of total revenues, declining 23.5% year over year.

Operating Details

Gross margin during the quarter under review came in at 79.6% compared with 79.3% reported in the year-ago quarter. Material gross margin contracted to 71% compared with 75% reported in the year-ago quarter.

Operating expense during the reported quarter came in at $45.4 million compared with $33.6 million reported in the year-ago quarter.

Operating margin came in at 41.2% compared with 19.4% reported in the year-ago quarter.

Balance Sheet

As on Jun 30, 2019, Universal Display had cash and cash equivalents (including short-term investments) of $552.7 million compared with $526.6 million at the end of previous quarter.

The company generated $83.9 million as cash from operating activities during the six months ended Jun 30, 2019.

The company recently approved a quarterly cash dividend payment of 10 cents per share to be paid on Sep 30, 2019 to shareholders as on Sep 16, 2019.

Guidance

Universal Display updated guidance for fiscal 2019. The company now anticipates revenues between $370 million and $390 million, under ASC 606 (previously $345 million and $365 million). Under ASC 605, the company expects revenues to be in the range of $425 million to $435 million (previously $405 million to $425 million).

How Have Estimates Been Moving Since Then?

Estimates review followed a downward path over the past two months. The consensus estimate has shifted -19.37% due to these changes.

VGM Scores

Currently, Universal Display has a great Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Universal Display has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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