Universal Electronics' Shares Slip on Lower-Than-Expected Q3 Projections

Universal Electronics’ shares closed 4.8 percent lower Friday at $62.70 as positive results for Q2 were offset by Q3 guidance that was below analysts’ expectations. UE had Q2 revenue of $177.9 million vs. $176.5 million in the year-ago quarter, but earnings-per-share guidance was short of consensus. Dougherty & Co. analyst Steven Frankel called UE’s Q2 results a “mixed bag.” Noting accelerating revenue and growing production volume in UE's new China factory, Frankel said Comcast purchases will become a smaller percentage of overall revenue. "It’s only a matter of time” before the company reaches double-digit revenue growth and margin expansion, said the analyst, citing new customer wins and the growing need of MVPDs to launch next-gen set-top boxes. On the company’s Thursday earnings call, CEO Paul Arling said Comcast, Cox and Shaw continued to upgrade customers to the X1 platform and its voice remote and that additional operators worldwide are in design and testing stages of the company’s technology. Chief Financial Officer Bryan Hackworth said Comcast was 24.2 percent of sales in the quarter and DirecTV was 10 percent. Arling also referenced new connection protocols and devices in home security and energy monitoring, and said the company expects to leverage existing relationships for that technology. UE expects home sensing and security sales to be five times what they were when it acquired Ecolink two years ago, and its purchase of thermostat control company RCS in May expands the company’s offerings in residential sensing, control and monitoring products, he said. In its Asia-Pacific OEM business, Universal picked up new customers in the home appliance market, including HVAC and home appliance makers, and later this year the company will introduce Wi-Fi thermostat controller modules for several major Japanese brands. Arling said UE’s Wi-Fi modules will enable HVAC systems to become “smart and/or communicating to the point where the original unit put into your home will be capable of this integrated feature.”