Are you ready, Universal Display Corporation (OLED +10.68%) investors? Because your favorite OLED technologist announces fourth-quarter results this Thursday after the market close, and it's time to take a deeper look at what to expect.
Universal Display didn't provide specific earnings guidance during last quarter's report, but it did tell analysts to expect fourth-quarter revenue in the range of $48.1 million to $50.1 million. Consequently, that's in line with analysts' models, which call for fourth-quarter revenue and earnings of $48.9 million and $0.32 per share, respectively.
But to truly understand Universal Display's business, we need to look at more than just revenue and earnings. Here are three other things for which I'll be watching in the report.
Details on the long-term LG Display agreement
In late January, Universal Display stock popped after the company finally signed a long-term patent license and material purchase agreement with LG Display (LPL +1.17%). The deal itself wasn't a huge surprise. Universal Display management had even insisted at an investor conference in January that such an agreement was all but inevitable -- especially given the combination of UDC's patent strength and LG Display's commitment of billions of dollars toward building new OLED manufacturing facilities.
However, Universal Display's corresponding press release offered little in the way of specific financial terms. We know, for example, LG Display has agreed to pay license fees and running royalties on sales of its OLED products. And we know the agreement runs through the end of 2022. But we don't know exactly how much revenue those license fees and royalty payments will generate for Universal Display over that period.
Watch and listen closely, then, for any elaboration from management on how the contract will affect Universal Display's top and bottom lines.
Details on Cupertino's adoption of OLED
Next, I'd love to hear more information about Apple's (AAPL +3.26%) plans for adopting OLED technology.
Almost two years ago during Universal Display's first-quarter 2013 call, for example, CEO Steve Abramson piqued my interest by mentioning Apple had recently filed a patent for a flexible OLED wrist-worn display. Sure enough, despite the fact Apple stopped short of confirming Apple Watch will feature an OLED display -- instead opting to call it a "flexible Retina display" -- several South Korean media outlets have since cited sources at LG Display as confirming they will provide small OLED screens for Apple's wrist-worn device.
Even then, the Apple Watch's small display surface area means it represents only a minor incremental revenue opportunity for Universal Display. That's why I'll also be listening for hints of whether Apple intends to include OLED in one of its upcoming iPhone models.
And yes, I'll admit UDC investors have waited for years for that to happen. But we also shouldn't underestimate recent reports that Apple may have finally tasked both Innolux and longtime supplier Foxconn (NASDAQOTH: FXCNY) to construct a $2.6 billion OLED display factory. According to Japanese tech news site Nikkan Kogyo Shimbun, that factory is targeting the "2016 or 2017" production of OLED screens for both wearable devices and roughly 5-inch smartphone displays. If these reports turn out to be accurate, Universal Display will likely be the primary benefactor.
2015 guidance
Finally, expect Universal Display management to provide their first look at how they believe 2015 will unfold. As per usual, the guidance will likely only come in the form of a revenue range and a few supplemental comments to explain any under- or overperformance relative to Wall Street's expectations. Analysts, on average, are currently modeling 2015 revenue and earnings of $215.3 million and $1.26 per share, respectively.
Any number of factors could sway Universal Display's expected 2015 revenue range, notably including LG Display's planned capacity expansions, as well as Samsung Display's efforts to diversify away from Samsung Electronics amid a lull in high-end smartphone sales. But assuming Universal Display hits the middle of its 2014 guidance range for the former, that would mean relatively modest 16.9% year-over-year revenue growth in 2015.
Whether Universal Display lives up to those expectations remains to be seen. But if one thing is sure, it's that I'll be listening closely for the three things above when Thursday arrives. Be sure to check back here to see how Universal Display fared.
