It has been about a month since the last earnings report for Analog Devices (ADI Quick QuoteADI - Free Report) . Shares have added about 5.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Analog Devices due for a pullback? 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 Q3 Earnings Beat Estimates

Analog Devices has reported third-quarter fiscal 2024 adjusted earnings of $1.58 per share, which surpassed the Zacks Consensus Estimate by 5.3%. The bottom line declined 37% from the year-ago quarter.

Revenues of $2.31 billion beat the Zacks Consensus Estimate of $2.27 billion. However, the top line fell 25% from the year-ago quarter.

Softness in the industrial, communications and automotive end-markets led to the year-over-year decline in the top line.

Revenues by End Markets

Industrial: The market generated revenues of $1.06 billion (accounting for 46% of the total revenues), which fell 37% year over year. The figure missed the Zacks Consensus Estimate of $1.07 million.

Communications: Revenues from the market were $266.6 million (12% of revenues), decreasing 26% from the year-ago quarter. The figure beat the Zacks Consensus Estimate of $247 million.

Automotive: Revenues from the market summed up to $670.3 million (29% of revenues), down 8% from the year-ago quarter. The figure missed the Zacks Consensus Estimate of $682 million.

Consumer: The market generated revenues of $316.6 million (14% of revenues), reflecting 3% growth from the year-ago quarter. The figure beat the Zacks Consensus Estimate of $269 million.

Operating Details

The adjusted gross margin contracted 430 basis points (bps) from the year-ago quarter to 67.9%.

Adjusted operating expenses were $618.8 million, down 17.7% from the year-ago quarter. As a percentage of revenues, adjusted operating expenses were 26.8%, expanding 240 bps year over year.

The adjusted operating margin was 41.2% in the reported quarter, which contracted 660 bps from the year-ago quarter.

Balance Sheet & Cash Flow

As of Aug 3, 2024, cash and cash equivalents, and short-term investments were $2.54 billion, up from $2.36 billion as of May 4, 2024.

The long-term debt was $6.66 billion at the end of third-quarter fiscal 2024 compared with $6.61 billion at the end of second-quarter fiscal 2024.

Net cash provided by operations was $855 million in the reported quarter, up from $808 million in the prior quarter.

ADI generated $701 million in free cash flow in the fiscal third quarter.

Analog Devices returned $574 million to its shareholders in the fiscal third quarter, of which dividend payments accounted for $456 million and repurchased shares amounted to $118 million.

Guidance

For fourth-quarter fiscal 2024, ADI expects revenues of $2.40 billion (+/- $100 million). 

Non-GAAP earnings are expected to be $1.63 (+/- $0.10) per share. 

The company anticipates a non-GAAP operating margin of 41% (+/- 100 bps).

How Have Estimates Been Moving Since Then?

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

VGM Scores

At this time, Analog Devices has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the lowest quintile 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 broadly 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.