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Why Is Dolby Laboratories (DLB) Up 1.8% Since Last Earnings Report?
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It has been about a month since the last earnings report for Dolby Laboratories (DLB - Free Report) . Shares have added about 1.8% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Dolby Laboratories due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Dolby's Q3 Earnings Top Estimates
Dolby reported third-quarter fiscal 2024 non-GAAP earnings per share (EPS) of 71 cents compared with 55 reported in the prior-year quarter. The bottom line surpassed the Zacks Consensus Estimate by 20.3%. Lower operating costs and higher operating income were primary growth drivers.
Revenues for the quarter declined 3% year over year to $288.8 million. However, the top line beat the Zacks Consensus Estimate by 0.9%.
The top line was adversely impacted by lower unit shipments of audio devices amid a steady momentum across Dolby Atmos, imaging patents and Dolby Vision. Owing to an uncertain market environment, management now anticipates full-year revenues to be down 1-2%, which is at the lower end of its full-year guidance range.
Segmental Performance
Revenues from Licensing were $267 million, down 2% year over year. Products and Services’ revenues fell 14% year over year to $21.7 million. The downtick was due to slackening trends at the box office end coupled with weak device sales.
Broadcast Licensing contributed 36% to total licensing revenues in the quarter under review. Mobile Licensing, Consumer Electronics, PC Licensing and Licensing from Other Markets accounted for 11%, 10%, 15%, and 19% of licensing revenues, respectively. Management anticipates continued downward trends across Mobile, Consumer Electronics and Broadcasting for the full year.
Other Details
Gross profit was $253.1 million compared with $256.8 million in the year-ago quarter. Total operating expenses decreased to $216.3 million from $240.9 million.
Operating income was $36.7 million compared with $15.9 million in the year-earlier quarter.
Cash Flow and Liquidity
For the six months that ended on June 30, Dolby generated $211.1 million of net cash from operating activities compared with $282.1 million in the prior-year period.
As of June 30, 2024, the company had $741.6 million in cash and cash equivalents, with $526.2 million in total liabilities. It had $709.5 million in cash and cash equivalents, with $607 million in total liabilities, as of March 29, 2024.
Dolby also repurchased nearly 423,000 shares of its common stock during the quarter, with $72 million remaining in its stock repurchase authorization. In addition, Dolby's board of directors has approved an increase of $350 million to its stock repurchase program, taking the total amount available for future repurchases to roughly $422 million.
Outlook
For the fourth quarter of fiscal 2024, Dolby expects GAAP EPS in the band of 31-46 cents. Non-GAAP EPS is forecast to be between 61 cents and 76 cents on revenues of $300-$320 million.
For the quarter, Licensing revenue is expected to be between $275 million and $295 million.
On a GAAP basis, operating expenses are estimated in the range of $225-$235 million, whereas, on a non-GAAP basis, the metric is anticipated to be between $190 million and $200 million.
For fiscal 2024, revenues are estimated in the band of $1.27-$1.29 billion, changed from the prior view of $1.3 billion. Lower-than-anticipated shipments and lower revenue from cinemas led to the downward revision.
Dolby projects GAAP operating margin to be 20%, while non-GAAP operating margin is estimated to be nearly 31%. It continues to project non-GAAP EPS within the $3.60-$3.75 range.
On a GAAP basis, operating expenses are now anticipated to be between $875 million and $885 million, whereas, on a non-GAAP basis, the metric is estimated in the range of $735-$745 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -21.39% due to these changes.
VGM Scores
At this time, Dolby Laboratories has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Dolby Laboratories has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Dolby Laboratories (DLB) Up 1.8% Since Last Earnings Report?
It has been about a month since the last earnings report for Dolby Laboratories (DLB - Free Report) . Shares have added about 1.8% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Dolby Laboratories due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Dolby's Q3 Earnings Top Estimates
Dolby reported third-quarter fiscal 2024 non-GAAP earnings per share (EPS) of 71 cents compared with 55 reported in the prior-year quarter. The bottom line surpassed the Zacks Consensus Estimate by 20.3%. Lower operating costs and higher operating income were primary growth drivers.
Revenues for the quarter declined 3% year over year to $288.8 million. However, the top line beat the Zacks Consensus Estimate by 0.9%.
The top line was adversely impacted by lower unit shipments of audio devices amid a steady momentum across Dolby Atmos, imaging patents and Dolby Vision. Owing to an uncertain market environment, management now anticipates full-year revenues to be down 1-2%, which is at the lower end of its full-year guidance range.
Segmental Performance
Revenues from Licensing were $267 million, down 2% year over year. Products and Services’ revenues fell 14% year over year to $21.7 million. The downtick was due to slackening trends at the box office end coupled with weak device sales.
Broadcast Licensing contributed 36% to total licensing revenues in the quarter under review. Mobile Licensing, Consumer Electronics, PC Licensing and Licensing from Other Markets accounted for 11%, 10%, 15%, and 19% of licensing revenues, respectively. Management anticipates continued downward trends across Mobile, Consumer Electronics and Broadcasting for the full year.
Other Details
Gross profit was $253.1 million compared with $256.8 million in the year-ago quarter. Total operating expenses decreased to $216.3 million from $240.9 million.
Operating income was $36.7 million compared with $15.9 million in the year-earlier quarter.
Cash Flow and Liquidity
For the six months that ended on June 30, Dolby generated $211.1 million of net cash from operating activities compared with $282.1 million in the prior-year period.
As of June 30, 2024, the company had $741.6 million in cash and cash equivalents, with $526.2 million in total liabilities. It had $709.5 million in cash and cash equivalents, with $607 million in total liabilities, as of March 29, 2024.
Dolby also repurchased nearly 423,000 shares of its common stock during the quarter, with $72 million remaining in its stock repurchase authorization. In addition, Dolby's board of directors has approved an increase of $350 million to its stock repurchase program, taking the total amount available for future repurchases to roughly $422 million.
Outlook
For the fourth quarter of fiscal 2024, Dolby expects GAAP EPS in the band of 31-46 cents. Non-GAAP EPS is forecast to be between 61 cents and 76 cents on revenues of $300-$320 million.
For the quarter, Licensing revenue is expected to be between $275 million and $295 million.
On a GAAP basis, operating expenses are estimated in the range of $225-$235 million, whereas, on a non-GAAP basis, the metric is anticipated to be between $190 million and $200 million.
For fiscal 2024, revenues are estimated in the band of $1.27-$1.29 billion, changed from the prior view of $1.3 billion. Lower-than-anticipated shipments and lower revenue from cinemas led to the downward revision.
Dolby projects GAAP operating margin to be 20%, while non-GAAP operating margin is estimated to be nearly 31%. It continues to project non-GAAP EPS within the $3.60-$3.75 range.
On a GAAP basis, operating expenses are now anticipated to be between $875 million and $885 million, whereas, on a non-GAAP basis, the metric is estimated in the range of $735-$745 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -21.39% due to these changes.
VGM Scores
At this time, Dolby Laboratories has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Dolby Laboratories has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.