It has been about a month since the last earnings report for Analog Devices (ADI Quick QuoteADI - Free Report) . Shares have lost about 13.1% 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 drivers.

Analog Devices Beats Q3 Earnings & Revenue Estimates

Analog Devices reported third-quarter fiscal 2022 adjusted earnings of $2.52 per share, beating the Zacks Consensus Estimate by 3.7%. The bottom line rose 47% year over year.

Revenues of $3.11 billion surpassed the Zacks Consensus Estimate of $3.06 billion. Also, the top line improved 77% 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 remained headwinds to ADI, its high-performance analog, mixed-signal and power portfolio contributed well.

Revenues by End Markets

Industrial: Analog Devices generated revenues of $1.56 billion (accounting for 50% of the total revenues), which grew 55% year over year.

Communications: Revenues from the market were $490.7 million (16% of revenues), increasing 69% year over year.

Automotive: Revenues from the market summed $659.1 million (21% of revenues), up 127% from the year-ago quarter’s level.

Consumer: The market generated revenues of $404.98 million (13% of revenues), reflecting 136% growth on a year-over-year basis.

Operating Details

The adjusted gross margin expanded 250 basis points (bps) on a year-over-year basis to 74.1%.

Adjusted operating expenses were $746.6 million, up 51.5% from the year-ago quarter’s level. As a percentage of revenues, adjusted operating expenses were 24%, contracting 400 bps year over year.

The adjusted operating margin expanded 650 bps on a year-over-year basis to 50.1% in the reported quarter.

Balance Sheet & Cash Flow

As of Jul 30, 2022, cash and cash equivalents were $1.5 billion, down from $1.7 billion as of Apr 30, 2022.

Long-term debt was $6.252 billion at the end of the fiscal third quarter compared with $6.253 billion at the end of the fiscal second quarter.

Net cash provided by operations was $1.25 million in the reported quarter, up from $1.22 billion in the prior quarter.

ADI generated $1.08 billion of free cash flow in the fiscal third quarter.

Additionally, Analog Devices returned $1.3 billion to its shareholders, of which dividend payments account for $394 million and repurchased shares amount to $906 million in the fiscal third quarter.

Guidance

For fourth-quarter fiscal 2022, ADI expects revenues of $3.15 billion (+/- $100 million).

Non-GAAP earnings are expected to be $2.57 (+/- $0.10) per share.

Analog Devices anticipates non-GAAP operating margins of 50.3% (+/- 70 bps).

How Have Estimates Been Moving Since Then?

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

VGM Scores

Currently, Analog Devices has a nice Growth Score of B, a grade with the same score on the momentum front. 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 B. 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.