Universal Display shares tumble
Shares of Universal Display tumble on worries about sliding profitability
NEW YORK (AP) -- Shares of Universal Display Corp. tumbled Friday after the light-emitting diode company posted first-quarter results roughly in line with Wall Street predictions, but investors fretted that its profitability may be slipping.
THE SPARK: Universal Display posted a loss of $4.8 million, or 10 cents per share, compared with a loss of $1.2 million, or 3 cents per share, in the same quarter of 2012. Revenue increased 19 percent to $15 million.
Analysts, on average, expected a loss of 10 cents per share on $14.5 million in revenue, according to FactSet.
The company also backed its 2013 revenue guidance of $110 million to $125 million. Analysts expect $119 million.
THE BIG PICTURE: The Ewing, N.J., company makes components for displays that use organic light-emitting diodes, or OLEDs. Its key customer is Samsung Electronics Co. Revenue for the recent quarter got a boost from a 21 percent increase in material sales, to $12.8 million, including a 40 percent jump in commercial material sales, to $10.5 million.
No revenue was recognized under the company's Samsung Display Corp. licensing agreement, as Samsung is required to make licensing payments in only the second and fourth quarters of the year. Universal Display expects to recognize $20 million in licensing revenue under the contract in each of those quarters this year.
THE ANALYSIS: Wedbush analyst Craig Irwin, who rates the stock "Neutral," said the results shed more light on the company's growth prospects, but the ongoing challenges to profitability are becoming a problem.
Irwin noted that the company's first-quarter margins were significantly below what he expected, with prices of certain products sold to Samsung dropping as a result of volume discounts. He said he expects volume discounts on other components sold to Samsung to kick in soon.
But Cowen & Co.'s Robert Stone backed his "Outperform" rating for the stock, saying that the company's broadening customer and product portfolio will help it outperform the overall industry by more than 30 percent in a year.
THE SHARES: Down $5.39, or 16.2 percent, to $27.96 in afternoon trading, after dropping as low as $27.62 earlier in the session. Over the past 52 weeks, the shares have traded between $21.55 and $44.42. Since the beginning of the year, the stock is up about 30 percent.
