LG.Philips LCD Misses Q2 Numbers, Issues Weak Forecast; Impact on Flat Panel Stocks?

Includes: AUO, LPL
by: David Jackson

Excerpt from our One Page Annotated Wall Street Journal Summary (which you can get emailed to you every morning by signing up here):

LG.Philips LCD Swings to Net Loss Amid Decline in Panel Prices

  • Summary: Korean LCD manufacturer LG Philips LCD missed analyst expectations for Q2 profitability and forecast lower panel prices in Q3. The company announced a Q2 net loss of 322 billion won ($340.6 million) versus consensus expectations of 319.5 billion won, and revenue of 2.315 trillion won versus consensus of 2.31 trillion won. Panel prices fell 18% in Q2 and shipments rose 17%. LG Philips forecast LCD panel price declines of a mid-single digit percentage in Q3, and expects its EBITDA margin to be in the "low teens", little changed from the Q2 level of 10%.
  • Comment on related stocks/ETFs: LG Philips's results were broadly consistent with prior data points from 3M and earlier comments from AU Optronics, and only marginally worse than LG Philips' own pre-announcement. Weakness is now widely expected in the flat panel market, so the Q2 numbers shouldn't further impact the stocks. However, LG Philips' Q3 forecast of further single digit price declines and its projected failure to raise its EBITDA margin is negative for the group, particularly competitor AU Optronics (NYSE:AUO). Note also that Matsushita is doubling its plasma capacity.