Universal Display Corp. OLED reported fourth-quarter 2020 adjusted earnings of $1.13 per share, which topped the Zacks Consensus Estimate by 79.4%. In the fourth quarter of 2019, Universal Display had reported earnings per share of 56 cents.
Revenues increased 39.1% year over year to $141.5 million and beat the Zacks Consensus Estimate by 32.3%.
Following fourth-quarter results, shares of Universal Display were up more than 2.89% in the pre-market trading on Feb 19. In the past year, the company’s shares have rallied 32.7% compared with industry’s growth of 26.5%.
Universal Display Corporation Price, Consensus and EPS Surprise
Universal Display Corporation price-consensus-eps-surprise-chart | Universal Display Corporation Quote
Segment Details
Material sales (44.2% of total revenues) increased 3% from the year-ago quarter’s figure to $62.5 million. Green emitters sales (including yellow-green emitters) were $48.2 million, up 1% year over year. Red emitter sales were $14.3 million, up 10% year over year.
Royalty and license fees (53% of total revenues) surged 99% year over year to $75 million driven by higher customer sales of royalty-bearing OLED licensed products.
Adesis revenues came in at $4 million during the reported quarter compared with $3.2 million in the year-ago quarter.
Contract research services revenues (2.8% of total revenues) came in at $3.96 million, up 24.6% year over year.
Operating Details
Gross margin in the quarter under review came in at 80.9%, which contracted 120 basis points (bps) from the year-ago quarter’s figure. Material gross margin came in at to 61% compared with 73% reported in the year-ago quarter. The downside was caused by higher cost of material sales.
Operating expenses of $48.8 million were down 0.6% year over year. As a percentage of revenues, operating expenses contracted to 34.5% from 48.2% reported in the year-ago quarter.
The company reported operating income of $65.8 million, up 90.7% on a year-over-year basis. However, operating margin expanded to 46.5% from 33.9% in the prior-year quarter.
Balance Sheet
As of Dec 31, 2020, Universal Display had cash and cash equivalents (including short-term investments) of $730 million compared with of $673 million as of Sep 30, 2020.
The company hiked quarterly cash dividend by 33.3% to 20 cents per share, to be paid out on Mar 31, 2021 to all shareholders of record on Mar 16, 2021.
2020 Numbers in Details
For 2020, Universal Display adjusted earnings of $2.80 per share compared with $2.92 reported in 2019. The Zacks Consensus Estimate was pegged at earnings of $2.30 per share.
Revenues increased 6% year over year to $428.9 million. The consensus estimate stood at $394.3 million.
The company reported operating income of $157.5 million, down 0.5% on a year-over-year basis.
For 2020, cash flow from operating activities was $148.9 million compared with $193.9 million reported in 2019.
Guidance
Universal Display expects 2021 revenues in the range of $530-$560 million. The Zacks Consensus Estimate is currently pegged at $546.6 million.
Moreover, the company expects 2021 material gross margins in the 65-70% range, while overall gross margins are expected to be around 80%. Operating margins are 2021 are anticipated in the 40-45% range.
Research & development (R&D) expenses are projected to be up nearly 25% and Selling, general and administrative (SG&A) expenses are projected to be up nearly 15% for 2021. Overall, operating expenses (SG&A, R&D and patent costs) are expected to increase in the range of 20-25% on a year-over-year basis.
Markedly, Universal Display’s products are widely used by OEMs in the consumer electronics markets like Apple, Lenovo and Samsung. In 2020, the company also announced its collaboration with China Star Optoelectronics and set up OVJP Corporation to further commercialization of OLED TV manufacturing technology.
Zacks Rank & Stocks to Consider
Currently, Universal Display carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are HP Inc HPQ, CrowdStrike CRWD and Workday WDAY. All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
HP Inc and Workday are scheduled to release earnings on Feb 25, while CrowdStrike is slated to announce results on Mar 16.
Long-term earnings growth rate for HP, CrowdStrike and Workday are currently pegged at 5.4%, 25%, and 25.4%, respectively.
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