It has been about a month since the last earnings report for Analog Devices (ADI Quick QuoteADI - Free Report) . Shares have lost about 10.9% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Analog Devices Beats Q2 Earnings & Revenue Estimates

Analog Devices has reported second-quarter fiscal 2022 adjusted earnings of $2.40 per share, beating the Zacks Consensus Estimate by 13.2%. The bottom line rose 56% year over year.

Revenues of $2.97 billion surpassed the Zacks Consensus Estimate of $2.86 billion. Also, the top line improved 79% year over year.

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

Although the pandemic-led supply challenges and rising geopolitical tensions remain overhangs for the company, its expanding capacity and solid booking momentum are likely to benefit its financial performance in the days ahead.

Strong trends of automation, electrification and advanced connectivity remain major positives.

Revenues by End Markets

Industrial: Analog Devices generated revenues of $1.5 billion (accounting for 51% of the total revenues), which grew 54% year over year.

Communications: Revenues from the market were $473.1 million (16% of revenues), increasing 70% year over year.

Automotive: Revenues from the market summed $633.9 million (21% of revenues), up 145% from the year-ago quarter’s level.

Consumer: The market generated revenues of $363.9 million (12% of revenues), reflecting 12% growth on a year-over-year basis.

Operating Details

The adjusted gross margin expanded 330 basis points (bps) on a year-over-year basis to 74.2%.

Adjusted operating expenses were $710.2 million, up 46.8% from the year-ago quarter’s level. As a percentage of revenues, adjusted operating expenses were 23.9%, contracting 520 bps year over year.

The adjusted operating margin expanded 860 bps on a year-over-year basis to 50.3% in the reported quarter.

Balance Sheet & Cash Flow

As of Apr 30, 2022, cash and cash equivalents were $1.7 billion, down from $1.8 billion as of Jan 29, 2022.

Long-term debt was $6.253 billion at the end of the fiscal second quarter compared with $6.254 billion at the end of the fiscal first quarter.

Net cash provided by operations was $1.2 million in the reported quarter, up from $856.4 million in the prior quarter.

ADI generated $1.1 billion of free cash flow in the fiscal second quarter.

Additionally, Analog Devices returned $1.2 billion to its shareholders, of which it made dividend payments of $398 million and repurchased shares worth $776 million in the fiscal second quarter.

Guidance

For third-quarter fiscal 2022, ADI expects revenues of $3.05 billion (+/- $100 million).

Non-GAAP earnings are expected to be $2.42 (+/- $0.10) per share.

The company anticipates non-GAAP operating margins of 49.5% (+/- 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 11.42% due to these changes.

VGM Scores

At this time, Analog Devices has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. 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 #1 (Strong Buy). We expect an above average return from the stock in the next few months.