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Dolby (DLB) Q4 Earnings Surpass Estimates, Revenues Miss

Dolby Laboratories, Inc.DLB reported fourth-quarter fiscal 2018 adjusted earnings of 44 cents per share, beating the Zacks Consensus Estimate of 43 cents.

The company's GAAP earnings came in at 47 cents per share compared with 21 cents in the year-ago quarter.

For fiscal 2018, adjusted income was $2.93 per share, indicating a rise of 12.3% from fiscal 2017 level.

Inside the Headlines

Dolby's total revenues of $265.3 million came within the company's projected range of $265-$275 million. Notably, the figure improved 9.6% on a year-over-year basis. Healthy increase in revenues in Licensing segment contributed to the decent rise in the top line.

Dolby Laboratories Price, Consensus and EPS Surprise

Dolby Laboratories Price, Consensus and EPS Surprise | Dolby Laboratories Quote

However, revenues missed the Zacks Consensus Estimate of $272.4 million.

In fiscal 2018, the company's top line grew 8.4% to $1,171.9 million year over year. Revenues also came within the company's guidance provided previously.

The company's Licensing revenues came in at $240.1 million, up 12.5% year over year. Growth in Consumer Electronics and Mobile Devices sales drove the segment's growth. While higher revenues in DMAs and sound bars drove Consumer Electronic sales, Mobile Devices grew on the back of higher volume from Dolby-branded solutions and its patent licensing programs. Licensing in other markets was up about 6% year over year, driven by higher revenues in Dolby Cinema, partially offset by lower recoveries in automotive.

Product revenues came in at $20.7 million, down 13%. The decline was due to lower-than-expected volume in Cinema products in China. Revenues at the Services segment decreased 7.5% to $4.5 million.

In the fiscal fourth quarter, Dolby's operating margin expanded 420 basis points year over year to 13.8%.

Liquidity

As of Sep 28, 2018, Dolby had cash and cash equivalents of approximately $918 million, up from $627 million as of Sep 29, 2017.

As of Sep 28, 2018, net cash provided by operating activities came in at $352.2 million compared with $377.8 million a year ago.

Guidance

Concurrent with the market scenario, Dolby issued the guidance for first-quarter fiscal 2019 earnings and revenues. The company expects non-GAAP earnings in the range of 65-71 cents while revenues are anticipated to lie within $285-$305 million.

In addition, Dolby provided guidance for fiscal 2019. The company estimates total revenues to lie in the range of $1.24-$1.28 billion. Within total revenues, the company estimates licensing revenues to lie in the range of $1.08-$1.12 billion and products and services revenues to be $150-$170 million.

Our Take

Moving ahead, solid market traction of the company's Dolby Voice, Dolby Vision and Dolby Cinema are likely to fortify its market footprint. Also, the company's partnerships with industry frontrunners are expected to boost market traction of its offerings.

However, the Services segment is witnessing a decline in revenues, which is harming overall growth. Also, the market for consumer entertainment products is highly competitive and price sensitive, which exposes Dolby to the risks of reduced revenues owing to lower prices.

Zacks Rank & Stocks to Consider

Dolby currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the industry are lululemon athletica inc. LULU , Pool Corporation POOL and V.F. Corporation VFC . While lululemon athletica sports a Zacks Rank #1 (Strong Buy), Pool and V.F. Corporation carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

lululemon athletica surpassed estimates in each of the trailing four quarters with an average beat of 19.22%.

Pool exceeded estimates thrice in the trailing four quarters with an average beat of 8.58%.

V.F. Corporation surpassed estimates thrice in the trailing four quarters with an average beat of 11.00%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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