It has been about a month since the last earnings report for Analog Devices (ADI Quick QuoteADI - Free Report) . Shares have lost about 5.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Analog Devices due for a breakout? 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 drivers.

Analog Devices Beats Q4 Earnings & Revenue Estimates

Analog Devices reported fourth-quarter fiscal 2021 adjusted earnings of $1.73 per share, beating the Zacks Consensus Estimate by 2.4%. The bottom line increased 20% year over year and 0.6%, sequentially.

Revenues of $2.34 billion surpassed the Zacks Consensus Estimate of $2.30 billion. Also, the top line improved 53% year over year and 33% from the third-quarter fiscal 2021 level.

The strong performance delivered by Analog Devices across the consumer, communications, industrial and automotive markets drove the top line.

Revenues by End Markets

Industrial: Analog Devices generated revenues of $1.2 billion (accounting for 50% of total revenues), which grew 45% year over year.

Communications: Revenues from the market were $351.6 million (15% of revenues), increasing 13% year over year.

Automotive: Revenues from the market summed $452.6 million (19% of revenues), up 97% from the year-ago quarter’s level.

Consumer: The market generated revenues of $356.9 million (15% of revenues), reflecting 107% growth on a year-over-year basis.

Operating Details

Adjusted gross margin expanded 90 basis points (bps) on a year-over-year basis to 70.9%.

Adjusted operating expenses were $650.7 million, up 50.8% from the year-ago quarter’s level. As a percentage of revenues, adjusted operating expenses were 27.8%, contracting 50 bps year over year.

Adjusted operating margin expanded 140 bps on a year-over-year basis to 43.1% in the reported quarter.

Balance Sheet & Cash Flow

As of Oct 30, 2021, cash and cash equivalents were $1.98 billion, up from $1.5 billion as of Jul 31, 2021.

Long-term debt was $6.25 billion at the end of the fiscal fourth quarter compared with $3.82 billion at the end of the fiscal third quarter.

Net cash provided by operations was $940.7million in the reported quarter, up from $630.04 million in the prior quarter.

ADI generated $810 million of free cash flow in the fiscal fourth quarter.

Additionally, Analog Devices returned $2.5 billion to its shareholders, of which it made dividend payments of $371 million and repurchased shares worth $2.1 billion in the fiscal fourth quarter.

Guidance

For first-quarter fiscal 2022, ADI expects revenues of $2.60 billion (+/- $100 million).

Non-GAAP earnings are expected to be $1.78 (+/- $0.10) per share.

Analog Devices anticipates non-GAAP operating margins of 43.3% (+/- 70 bps).

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 6.3% due to these changes.

VGM Scores

Currently, Analog Devices has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, 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. It comes with little surprise Analog Devices has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.