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Why Analog Devices (ADI) Might be Well Poised for a Surge

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Analog Devices (ADI - Free Report) appears an attractive pick given a noticeable improvement in the company's earnings outlook. The stock has been a strong performer lately, and the momentum might continue with analysts still raising their earnings estimates for the company.

The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this semiconductor maker, should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- is principally built on this insight.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

For Analog Devices, there has been strong agreement among the covering analysts in raising earnings estimates, which has helped push consensus estimates considerably higher for the next quarter and full year.

Current-Quarter Estimate Revisions

For the current quarter, the company is expected to earn $2.42 per share, which is a change of +40.7% from the year-ago reported number.

The Zacks Consensus Estimate for Analog Devices has increased 11.42% over the last 30 days, as nine estimates have gone higher compared to no negative revisions.

Current-Year Estimate Revisions

For the full year, the earnings estimate of $9.24 per share represents a change of +43.03% from the year-ago number.

The revisions trend for the current year also appears quite promising for Analog Devices, with 11 estimates moving higher over the past month compared to no negative revisions. The consensus estimate has also received a boost over this time frame, increasing 9.62%.

Favorable Zacks Rank

Thanks to promising estimate revisions, Analog Devices currently carries a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

Investors have been betting on Analog Devices because of its solid estimate revisions, as evident from the stock's 5.9% gain over the past four weeks. As its earnings growth prospects might push the stock higher, you may consider adding it to your portfolio right away.


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