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What's in the Cards for Analog Devices (ADI) in Q1 Earnings?

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Analog Devices, Inc. (ADI - Free Report) is set to report fiscal first-quarter 2019 results on Feb 20.

Notably, the company topped the Zacks Consensus Estimate in the trailing four quarters, recording average positive earnings surprise of 5.67%.

In the last reported quarter, Analog Devices’ earnings of $1.55 per share delivered a positive surprise of 1.97%. The figure increased 1.3% sequentially and 6.9% from the year-ago quarter.

Revenues in the fiscal fourth quarter were $1.6 billion which topped the consensus mark of $1.57 billion. Moreover, the figure improved 3.6% year over year and 1.5% sequentially.

The top-line growth can be attributed to the company’s robust performance in the industrial and communication end-markets.

Coming to the price performance, shares of Analog Devices have gained 21.3% over a year, outperforming the industry’s rally of 0.4%.

For the first quarter, the company expects non-GAAP earnings to be $1.28 (+/- $0.07) per share. Further, revenues are anticipated to be $1.51 billion (+/- $50 million).

Let’s see how things are shaping up prior to this to-be-reported quarter.

 

Factors to Consider

Analog Devices continues to benefit from solid momentum across the industrial, automotive and communications end markets. Moreover, its deepening focus on product innovation and operational efficiency is a major positive.

In the industrial end-market, the company is expected to ride on the digital factory envision by Industry 4.0. Further, its capability to cater to the customer’s required level of precision and robustness will continue to drive performance in this particular market in the to-be-reported quarter. The Zacks Consensus Estimate for Industrial revenues is pegged at $730 million.

Further, the company’s performance in the automotive market should continue to gain from consumer demand for added technology and features in new vehicles. The Zacks Consensus Estimate for automotive revenues is pegged at $243 million.

Meanwhile, communications revenues are accelerating on the back of increasing deployment of 5G Massive MIMO. Further, Analog Devices strengthening performance in Chinese communication market is a tailwind. The Zacks Consensus Estimate for communications space revenues is pegged at $353 million in the to-be-reported quarter.

However, the company’s sluggish performance in the consumer end-market remains a major cause of concern for the to-be-reported quarter results. Declining usage of the company’s products in portable consumer applications is a major headwind. The Zacks Consensus Estimate for consumer revenues is pegged at $184 million.

Moreover, macroeconomic uncertainty and geopolitical fears are headwinds for the company.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Sell-rated stocks (Zacks Rank #4 or 5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Currently, Analog Devices has a Zacks Rank #4 (Sell) and an Earnings ESP of 0.00%, which indicates that the company is unlikely to beat estimates.

Stocks that Warrant a Look

Here are some stocks you may consider, as our proven model shows that these have the right combination of elements to post an earnings beat this quarter.

Warrior Met Coal (HCC - Free Report) has an Earnings ESP of +4.97% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

GTT Communications has an Earnings ESP of +173.53% and a Zacks Rank #2.

Square (SQ - Free Report) has an Earnings ESP of +5.95% and a Zacks Rank #2.

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