08.11.08 

ueic: EXECUTING IN A CHALLENGING ENVIRONMENT; UEI REMAINS A DIAMOND IN THE ROUGH FOR PATIENT INVESTORS
Universal Electronics (UEI) reported $70.7 million in revenue and $0.24 in EPS versus our estimates of $68.7 million in revenue and $0.23 in EPS, slightly ahead of our estimates and roughly in line with Street expectations. The guidance for Q3 was below consensus due to an outlier taking up the mean; however, our Q3 + 2008 estimates are little changed (Q3 down $0.01 and Q4 up $0.01), and we are already expecting and modeling a conservative back half for the consumer business. We believe the tightened guidance range for 2008 should actually provide investors some confidence in management and the 2H business outlook which will likely show good growth despite the economic challenges around expected consumer spending, while the stock is trading at almost half its forward expected growth rate in earnings. We remain leery of the outlook for the consumer segment due to macroeconomic conditions, and we remain at the low-end of guidance despite our expectations for new products later in the year and a positive contribution from the Audiovox win and new NEVO product. We are increasing our price target to $42, now based on our forward 2009 estimates-our $42 target price is 20x our 2009 EPS estimate, excluding interest income and stock option expense, plus ~$6 in net cash per share on the balance sheet. We believe UEI remains significantly under-valued, trading at almost half its expected forward EPS growth rate with $6+ in cash/share, which should continue to grow every quarter as well. We believe patient long-term small-cap investors will be rewarded as management executes its business as the secular business growth trends (analog to digital TV conversions, HD upgrades, DVR/HD-DVR deployments, LCD/Plasma TV penetration, increasing personal digital content and devices, Asian OEM greenfield opportunities and other int'l MSOs/OEMS as well, etc. etc.) all remain powerful. Contact Us for Full Report - PDF

05.08.08 

ueic: INLINE QUARTER AND NEW CUSTOMER WINS; EXPECT SHARES TO CONTINUE TO RECOVER FROM OVERSOLD CONDITION IN FQ1; REITERATE BUY
Universal Electronics (UEI) reported $61.2 million in revenue and $0.17 in EPS versus our estimates of $62.2 million in revenue and $0.16 in EPS, roughly inline with our estimates and Street expectations. Audiovox (VOXX: Not Covered) was announced as a new customer, which is very positive in our opinion. Audiovox will now distribute the One For All brand exclusively in the US (replacing Computime), and UEI will exclusively supply chipsets to Audiovox's product lines, which include the RCA and Acoustic Research brands. Additionally, UEI announced a few new international wins and noted that it had additional subscriber/carrier wins in the US and internationally that the Company expects to be able to announce in FQ2:08 and beyond. We remain leery of the outlook for the consumer segment due to macroeconomic conditions, and we are still at or below guidance for that business segment despite our expectations for new products later in the year and a positive contribution from the Audiovox win. After an inline quarter, our $38 target price remains unchanged and is still based on 22x our FY:08 EPS estimate, excluding interest income and stock option expense, plus ~$6 in net cash per share on the balance sheet. Contact Us for Full Report - PDF

02.22.08 

ueic: FQ4 SOFTNESS AS EXPECTED; MINOR MODEL UPDATE POST FY:08 GUIDANCE; REITERATE BUY
Universal Electronics (UEI) reported $66.2 million in revenue and $0.40 in EPS versus our estimates of $68.2 million and $0.32 in EPS, beating lowered EPS estimates through 1) much lower SG&A costs after not taking management bonuses due to missing internal annual budgets at year end and 2) a slightly lower tax rate. The FQ1 guidance is substantially below expectations, with FY:08 inline to slightly better than we had expected; however, the guidance clearly implies new business and product ramps that we suggest investors take a wait and see approach given softening consumer demand. Net/net, there is almost no change to our FY:08 estimates after the new guidance, and we conservatively remain at the low end of new guidance. Our $38 target price is also unchanged, which is based on 22x our FY:08 EPS estimate, excluding interest income and stock option expense, plus ~$6 in net cash per share on the balance sheet. We would aggressively buy the shares of Universal Electronics right here, and we believe that investors should not be overly concerned about near-term softness given the bright medium-term fundamental outlook and current valuation of the shares. Contact Us for Full Report - PDF

02.15.08 

ueic: ROCK BOTTOM VALUATION, WITH A LIKELY DECEMBER MISS OVER-DISCOUNTED; GOOD PROSPECTS AHEAD DESPITE A SLOWING CONSUMER
We are attempting to quantify the weakness that Universal Electronics, Inc. (UEI), likely experienced in its consumer segment in the December quarter, which we wrote about in our January 18th note. As such, we are trimming our published CY:08 forecast to be conservative ahead of expected guidance by the Company (which we also expect to be conservative) when it reports after the market close on February 21st. Our CY:08 estimates go from $319M and $1.59 to $308M and $1.51, respectively, and our December quarter estimates are now $68.2M and $0.32, down from $73M and $0.36 and compared to guidance of $70-75M and $0.38-0.42. UEI's stock price has completely broken down in a weak market, with a December quarter miss also anticipated, and with new annual guidance in question around uncertain consumer spending and the effect down the road on a possible slowdown in advanced services and HD/DVR deployments. In our opinion, UEI's current price offers a tremendous opportunity to buy the equity at a rock bottom valuation in this period of uncertainty in the eyes of nervous investors and, more importantly, the lack of a large, marginal institutional buyer. DirecTV (DTV: Not Rated) and Comcast (CMCSA: Not Rated), the Company's two largest customers, both reported results over the past two days and investors should take both the commentary and the on-going digital and HD/DVR penetration and subscriber trends as proof of the underlying secular story for Universal Electronics. We believe that the market has over-discounted the anticipated December weakness and 2008 (and beyond!) growth opportunities, and we point to the forward historical PE chart included below, as well as the updated valuation metrics off of our new numbers-trough valuations both ways. We also note that the forward PE chart does not adjust for cash, as we do in our valuation analysis, and we expect UEI to have approximately $6/share in cash currently when it reports the December balance. We are keeping our 22x forward multiple consistent and, therefore, our price target moves to $38 (from $40) based on our updated CY:08 EPS estimate, excluding interest income and stock option expense, plus ~$6 in net cash per share on the balance sheet. We would aggressively buy the shares of Universal Electronics right here, and we believe that investors should not be overly concerned in this volatile market if shares temporarily trade a dollar or two lower off of this expected miss and conservative guidance. It is a great time to start buying the shares, in our view. Contact Us for Full Report - PDF

01.18.08 

ueic: UEI BIDS FOR ZILOG'S REMOTE CONTROL CHIPSET BUSINESS
In an SEC filing this morning, it is stated that UEI (UEIC:BUY) has submitted a bid for struggling semiconductor maker, Zilog (ZILG:NR) along with Riley Investment Management. It is unclear what UEI's portion of the bid would be; however Zilog's remote control chipset revenue was approximately 27% of its revenues during the past six months according to its most recent 10Q filing. The total bid appears to be $76M cash or $56M net consideration given Zilog's last reported cash and debt positions. We would view this acquisition as an enormous positive if the bid were to be accepted, and even though the exact split is not disclosed, it appears immediately accretive (in first year) using our math above. Contact Us for Full Report - PDF

11.02.07 

ueic: SOLID Q3 BUT SOFT BUSINESS REVENUE FORECAST COULD CREATE A NEAR-TERM SELLOFF
Universal Electronics (UEI) reported $69.0M and $0.32 versus our estimates of $69.6M and $0.33, which was roughly at the mid-point of guidance. The outlook for a decline in business category revenues for December may spook some momentum or short-term investors, but we believe that any meaningful selloff would be another terrific buying opportunity, similar to the opportunity presented this summer in the shares. UEI's business remains lumpy and difficult for us or anyone to model quarter by quarter; however, management's execution to its earnings ranges over the course of this year has been strong and the secular trends are very powerful for UEI. We have adjusted our model to reflect updated December quarter guidance and our CY:08 estimate only changes by approximately $0.03. We continue to base our price target of $40 on 22x our CY:08 EPS estimate, which is now $1.54 (excludes interest income and stock option expense), plus ~$6 in net cash per share on the balance sheet, and we would use any weakness to accumulate shares. Contact Us for Full Report - PDF

09.28.07 

ueic: FUNDAMENTALS STRONG; REITERATE BUY
We spent two days with the management of Universal Electronics in the Midwest this week and came away feeling very positive about the prospects for the Company given the ongoing secular industry trends, DVR and HD/HD-DVR penetration and deployment trends in its current customer base, and opportunities in the greenfield Asian cable/satellite MSO market. Additionally, we feel that the acquisition announced this week of Sling Media by EchoStar may present an opportunity for the Company in the near future to penetrate the legacy EchoStar business. Regardless of whether UEI is able to displace SMK/Zilog at EchoStar, we expect the new STB business of EchoStar to promote further innovation in the STB area, like integration of Sling's functionality, which may accelerate STB innovation and upgrades industry-wide to include additional functionality like networking, beaming of IR codes, etc: we believe all this is very positive for remote deployment where UEI commands an estimated 65-70% market share in the US. We continue to base our price target of $40 on 22x our 2008 EPS estimate of $1.57 (excludes interest income and stock option expense), plus ~$5 in net cash per share on the balance sheet, and we reiterate our Buy rating on the shares. Contact Us for Full Report - PDF

08.03.07 

ueic: SOLID Q2; REITERATE BUY
Universal Electronics (UEI) reported its June quarter results last night of $71.5M in revenue and $0.30 in EPS, versus our estimates of $69.9M and $0.30, respectively. The results reflected solid performance and an acceleration in business orders at quarter end, which led to additional freight costs of $1.2M and capped further EPS upside in what was a strong quarter. Looking forward, UEI is guiding up 2007 revenues slightly, but admits that it still has limited visibility into its seasonally strongest Q4. We continue to model revenues and EPS slightly higher than the high-end of guidance due to a strong anticipated consumer offering in Q4, with an updated Nevo line and CEDIA business and strong business revenues from customer DirecTV, which is still expected to deploy a new massive HD offering. In addition, we still expect to hear new wins in Asia in 2007, with product likely to begin shipping in 2008. Our estimates changed very little post the earnings update. We continue to base our price target of $40 on 22x our updated 2008 EPS estimate of $1.57 (excludes interest income and stock option expense), plus ~$5 in net cash per share on the balance sheet, and we reiterate our Buy rating on the shares. Contact Us for Full Report - PDF

06.11.07 

ueic: UPGRADING TO BUY; STRONG GROWTH OUTLOOK AHEAD
We are upgrading our rating on Universal Electronics (UEI) from Hold to Buy, and we believe that investors should not let valuation on 2007 numbers/guidance alone dissuade them from buying the shares in order to participate in the growth we see ahead for UEI. We are rolling our valuation on the shares forward to 2008 numbers, and we believe that the stock will likely appreciate during the remainder of the year, as UEI should continue to put up solid results based upon favorable secular industry trends, new product introductions, and trends at its OEM customers. In addition, we expect more international cable/satellite wins in Europe and Latin America in the near term, and we expect Asia to ramp faster than most people expect. UEI is currently pursuing relationships with Asian-based service providers, which should begin to bear fruit with the first shipments in 2008, in our view. We have already outlined our thesis on the opportunities that UEI has in front of it, with valuation and some potential execution risk around the satellite STB open standard being the only things that have kept us at a Hold rating prior to this upgrade. We now have greater confidence that the changeover in STB standards in July in the US will likely not have an adverse affect on the Company, and we believe that our upwardly revised 2008 estimates still remain conservative, while 2007 should continue to be quite strong as well. We are basing our price target of $40 on 22x our updated 2008 EPS estimate of $1.62 (includes interest income and stock option expense), plus a current estimated ~$5.50 in net cash per share on the balance sheet. Contact Us for Full Report - PDF

05.04.07 

ueic: BEAT + RAISE QUARTER; MAINTAINING HOLD ON VALUATION
Universal Electronics (UEI) reported its March quarter results last night of $66.0M in revenue and $0.31 EPS, versus our estimates of $63.9M and $0.27. The upside came from slightly stronger business revenue versus our expectations, with most other variables in line with expectations. Looking forward, UEI is guiding to a better June due to continued expected strength in its business segment, and guiding for the consumer segment to fall even further sequentially. However, the Company expects to refresh its NEVO SL high-end consumer product line with more variations that should drive stronger consumer growth and blended gross margins in H2:07. Although UEI results are impressive, we are already factoring in above-guidance revenue growth for 2007 and a strong rebound in gross margins from new consumer products. UEI trades at ~24x our updated 2007 EPS estimate of $1.30, or ~21x 2007E EPS ex-interest income and option expense, plus current $5.55 in cash per share, which is roughly in line with its historical median forward multiple. We believe the shares are fairly valued at current levels and would look to initiate new positions or add to existing positions at lower levels given the recent rapid price appreciation. Contact Us for Full Report - PDF

02.26.07 

ueic: INITIATING COVERAGE WITH A HOLD RATING; GOOD INVESTMENT TO CAPITALIZE ON EMERGING DIGITAL HOME, GROWTH IN CONSUMER ELECTRONICS AND INCREASING CONNECTIVITY WITH DIGITAL CONTENT; IMPRESSIVE CLIENT LIST, LOTS OF OPPORTUNITY AHEAD
We are initiating coverage of universal wireless remote company, Universal Electronics, Inc. ('UEI'), with a Hold rating only due to valuation given its recent rapid appreciation. UEI has some very interesting products and has a dominate position in the domestic cable and satellite universal remote market. We believe that UEI is positioned well, with over 300,000 IR codes in its portfolio and over 170 patents, to take advantage of many of the secular trends in the emerging digital home, growth in new electronic devices like DVRs and Digital TVs, and the increasing need to access all of these devices, and new and existing digital content via wireless remotes. The Company trades at 24.0x our 2007 EPS estimate of $1.16, or ~22x 2007E EPS ex-interest income plus current $4.50 in cash, which is roughly in line with our forecasted earnings growth rate, historical median forward multiple, and the peer group we identify. We believe the shares are fairly valued around $26 per share and would look to initiate new positions or add to existing positions at lower levels given the recent rapid price appreciation. Contact Us for Full Report - PDF