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Analog Devices (ADI) Up 5.4% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Analog Devices (ADI - Free Report) . Shares have added about 5.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Analog Devices 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.

Analog Devices Beats Q4 Earnings & Revenue Estimates

Analog Devices Inc. reported fourth-quarter fiscal 2020 adjusted earnings of $1.44 per share, which beat the Zacks Consensus Estimate of $1.32. Also, the bottom line increased 21% year over year.

Revenues of $1.53 billion also surpassed the Zacks Consensus Estimate of $1.44 billion. The top line increased 4.8% sequentially and 5.7% year over year. Also, B2B revenues increased 4% sequentially and 10% year over year.

The increase in revenues was led by growth in all its end markets.

Revenues by End Markets

Industrial: The company generated revenues of $811.2 million (accounting for 53% of total revenues), up 9% year over year.

Communications: Revenues from this market came in at $312.6 million (20% of revenues), increasing 19% year over year.

Automotive: Revenues from this market came in at $229.8 million (15% of revenues), up 2% from the year-ago quarter.

Consumer: This market generated revenues of $172.6 million (11% of revenues), reflecting a 17% decline on a year-over-year basis.

Operating Details

Non-GAAP gross margin expanded 160 basis points (bps) on a year-over-year basis to 70%.

Total adjusted operating expenses were $431.4 million, up 1.1% from the year-ago quarter.

Non-GAAP operating margin expanded 290 bps on a year-over-year basis to 41.7% for the reported quarter.

Balance Sheet & Cash Flow

At fiscal fourth quarter-end, cash and cash equivalents were $1.06 billion, down from $1.09 billion in the prior quarter.

Long-term debt was approximately $5.1 billion, flat sequentially.

Net cash provided by operations was $673 million for the fiscal fourth quarter, up from $557.2 million in the prior quarter.

The company generated $643 million of free cash flow during the fiscal fourth quarter.

Additionally, Analog Devices returned $237 million to shareholders through dividends and share repurchases in the reported quarter.

Guidance

For first-quarter fiscal 2021, Analog Devices expects revenues to be $1.50 billion (+/- $70 million).

Non-GAAP earnings are expected to be $1.30 (+/- $0.10) per share.

The company anticipates non-GAAP operating margins to be 40% (+/- 100 bps).

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

Currently, Analog Devices has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Analog Devices has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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