Organic light-emitting diode researcher Universal Display (NASDAQ:PANL) reports Q3 2007 earnings results tomorrow afternoon. It's never earned a profit before. Will tomorrow be any different?

What analysts say:

  • Buy, sell, or waffle? Seven analysts follow Universal Display, with buyers outnumbering holders by a 5-to-2 margin.
  • Revenue. On average, the analysts expect to see a 13% rise in revenue, to $3.5 million.
  • Earnings. Last year's Q3 loss is expected to expand by a third to $0.12 per share.

What management says:
Much as we love the stock at Universal Display, I must say: These guys don't make an investor's life easy. Reviewing the firm's SEC filings, you might get the impression that Universal Display never reported earnings last quarter. UD did, however, dutifully file the associated 10-Q, and if you dig deep enough through the Yahoo! Finance archives, you'll eventually find the press release.

Fortunately, fellow Fool Anders Bylund did the legwork for Fools last quarter, discussing the results in twincolumns. The highlights: Sales and earnings declined; cash burn and, yes, stock dilution accelerated.

What management does:
Performing research for, selling chemicals to, and collecting royalties from clients including Aixtron AG (NASDAQ:AIXG), AU Optronics (NYSE:AUO), and LG.Philips LCD (NYSE:LPL) still earns Universal Display high gross margins. But sales are declining, research and development costs are climbing, and selling, general, and administrative expenses rose 16% year over year in the last quarter. All those forces are conspiring to turn UD's operating and net margins increasingly negative.

Margins

6/06

9/06

12/06

3/07

6/07

Gross

91.3%

90.7%

91.2%

91.4%

91.2%

Op.

(146.7%)

(151.9%)

(145.8%)

(159.1%)

(179.6%)

Net

(129.3%)

(132.1%)

(127.4%)

(139.3%)

(156.0%)

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Hope springs eternal among investors, however. Universal Display's great hope this quarter came in the form of dual announcements from Sony (NYSE:SNE) and Toshiba. Both TV-makers announced their intentions to begin marketing OLED-screen televisions in the near future. Sony promises to have 11-inch sets on store shelves by Christmas, while Toshiba asks consumers to wait a little longer (until 2009) for its own offerings.

If the products prove to be hits, UD should reap greater high-margin royalty revenue on each set sold. But don't go counting your royalties before they're cashed, investors. Unless and until the sales materialize (and perhaps for some time thereafter), I fear we'll see UD continue to post losses.

For more background on why we like Universal Display, and why it's nearly doubled in the less than three years since we recommended it, try out Rule Breakers for 30 days, absolutely free.

Fool contributor Rich Smith does not own shares of any company named above. Why do we tell you this? Because The Motley Fool has a disclosure policy.