Universal Display Corporation OLED reported relatively modest third-quarter 2024 results, with the bottom line surpassing the Zacks Consensus Estimate but the top line missing the same. However, the company reported a year-over-year top-line expansion, backed by solid licensing revenues.

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Growing OLED proliferation in the IT market is driving growth. Management is undertaking several measures to improve its operational and strategic infrastructure to bolster its leadership position in the industry.

Net Income

Net income in the third quarter was $66.9 million or $1.40 per share compared with $51.5 million or $1.08 per share in the year-ago quarter. The improvement was primarily attributed to year-over-year net sales growth. The bottom line beat the Zacks Consensus Estimate of $1.20.

Revenues

The company generated $161.6 million in revenues, up from $141.1 million in the year-ago quarter. Increasing royalty and license fees boosted the top line. However, the top line missed the consensus estimate by $6 million.

Material sales contributed $83.4 million to revenues compared with $92.5 million in the prior-year quarter. Fluctuating material purchasing patterns from consumers affected net sales. The top line missed our estimate of $98 million.

Revenues from Green emitter sales decreased to $62.6 million from $68.9 million in the year-ago quarter, whereas revenues from red emitter sales fell to $20.1 million from $22.1 million in the year-ago quarter.

Revenues from Royalty and license fees were $74.6 million, up from $45.9 million in the year-ago quarter. The top line beat our estimate of $62.3 million.

Revenues from Contract research services were $3.6 million compared with $2.7 million in the prior-year quarter. The segment’s revenues missed our estimate of $5.2 million.

Other Details

Quarterly gross profit increased to $125.8 million from $106.8 million in the prior-year quarter. The gross margin was 78% up from 76% a year ago. Operating income was $67 million and the margin was 41% compared with the year-ago quarter’s $48.4 million and 34%, respectively.

Cash Flow & Liquidity

In the first nine months of 2024, Universal Display generated $219 million in cash from operating activities compared with $117.7 million in the year-ago period. As of Sept. 30, 2024, the company had $79.6 million in cash and cash equivalents and $54.3 million in retirement plan benefit liability.

Guidance Down

For 2024, the company expects revenue of $625-645 million, down from the $645-675 million mentioned earlier. The gross margin is projected at 76-77%. The operating margin is expected at 35-40%.

Several factors like higher inventory levels and macroeconomic concerns are affecting the spending decisions of some customers. However, management expects the IT market to be the key growth driver in the near term. Expanding markets like automotive and consumer electronics (including OLED AR/VR devices, smartwatches, smartphones and TVs) will drive growth in the upcoming years.

Zacks Rank & Other Stocks to Consider

Universal Display currently sports a Zacks Rank #1 (Strong Buy).

Arista Networks, Inc. ANET flaunts a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the last reported quarter, ANET delivered an earnings surprise of 8.25%. It provides cloud networking solutions for data centers and cloud computing environments. The company offers 10/25/40/50/100 gigabit Ethernet switches and routers optimized for next-generation data center networks.

Ubiquiti Inc. UI currently sports a Zacks Rank of 1. The company offers a comprehensive portfolio of networking products and solutions for service providers and enterprises.

UI’s excellent global business model, which is flexible and adaptable to evolving market changes, helps it overcome challenges and maximize growth. The company’s effective management of its strong global network of more than 100 distributors and master resellers improved its UI’s visibility for future demand and inventory management techniques.

Workday Inc. WDAY carries a Zacks Rank #2 (Buy) at present. In the last reported quarter, the company delivered an earnings surprise of 7.36%.

WDAY is a leading provider of enterprise-level software solutions for financial management and human resource domains. The company’s cloud-based platform combines finance and HR in a single system, making it easier for organizations to provide analytical insights and decision support.

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