It has been about a month since the last earnings report for Analog Devices (ADI Quick QuoteADI - Free Report) . Shares have lost about 2.2% 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 Q2 Earnings Beat Estimates

Analog Devices has reported second-quarter fiscal 2024 adjusted earnings of $1.40 per share, which surpassed the Zacks Consensus Estimate by 11.1%. The bottom line declined 51% from the year-ago quarter.

Revenues of $2.16 billion beat the Zacks Consensus Estimate of $2.10 billion. The top line fell 34% from the year-ago quarter.

Softness in the communications, consumer, automotive and industrial end-markets was a major negative.

Revenues by End Markets

Industrial: The market generated revenues of $1.01 billion (accounting for 47% of the total revenues), which fell 44% year over year. The figure beat the Zacks Consensus Estimate of $965.7 million.

Communications: Revenues from the market were $240.78 million (11% of revenues), decreasing 45% from the year-ago quarter. The figure lagged the Zacks Consensus Estimate of $253.6 million.

Automotive: Revenues from the market summed up to $658.24 million (30% of revenues), down 10% from the year-ago quarter. The figure surpassed the Zacks Consensus Estimate of $652.8 million.

Consumer: The market generated revenues of $245.18 million (11% of revenues), reflecting a 9% decline from the year-ago quarter. The figure beat the Zacks Consensus Estimate of $232.3 million.

Operating Details

The adjusted gross margin contracted 700 basis points (bps) from the year-ago quarter to 66.7%.

Adjusted operating expenses were $597.74 million, down 18.5% from the year-ago quarter. As a percentage of revenues, adjusted operating expenses were 27.7%, expanding 520 bps year over year.

The adjusted operating margin was 39% in the reported quarter, significantly lower than 51.2% reported in the year-ago quarter.

Balance Sheet & Cash Flow

As of May 4, 2024, cash and cash equivalents were $1.94 billion, up from $1.3 billion as of Feb 3, 2024.

The long-term debt was $6.61 billion at the end of second-quarter fiscal 2024 compared with $5.95 billion at the end of first-quarter fiscal 2024.

Net cash provided by operations was $808 million in the reported quarter, down from $1.14 billion in the prior fiscal quarter.

ADI generated $620 million of free cash flow in the fiscal second quarter.

Analog Devices returned $678 million to its shareholders in the fiscal second quarter, of which dividend payments accounted for $456 million and repurchased shares amounted to $222 million.

Guidance

For third-quarter fiscal 2024, ADI expects revenues of $2.27 billion (+/- $100 million).

Non-GAAP earnings are expected to be $1.50 (+/- $0.10) per share.

Analog Devices anticipates a non-GAAP operating margin of 40% (+/- 100 bps).

How Have Estimates Been Moving Since Then?

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

The consensus estimate has shifted 11.19% due to these changes.

VGM Scores

Currently, Analog Devices has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. 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.