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Will Analog Devices (ADI) Q4 Earnings Spring a Surprise?

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Analog Devices, Inc. (ADI - Free Report) , one of the world leaders in the design, manufacture and marketing of high-performance analog, mixed-signal and digital signal processing integrated circuits, will report fourth quarter fiscal 2016 results on Nov 22.

Let’s see how things are shaping up for this announcement.

Factors at Play

Analog Devices delivered better-than-expected results for the third quarter, surpassing the Zacks Consensus Estimate on both counts. These strong results were driven by a strong consumer market, which offset relatively weak industrial, auto and communication markets.

In 2015, the company successfully incorporated Hittite and expanded the available opportunities. It expects to deliver strong revenue synergies starting 2017.

Analog Devices will acquire Linear Technology in a cash and stock deal worth $14.8 billion. The acquisition is expected to be completed in the first half of 2017.  It will make Analog Devices an industry leader across a huge range of products, customer breadth and scale. The deal will help it to grow significantly in industrial, automotive and communications infrastructure markets.

The transaction is anticipated to be immediately accretive to the company’s bottom line results. In addition, the company expects annualized cost synergies of $150 million within the first 18 months following the completion of the transaction.

While its investments are aimed at strengthening the product line and countering increasing competition, the policy of returning cash through dividends and share buybacks will ensure investor loyalty.

For the fourth quarter of fiscal 2016, management expects revenues in a range of $910 million to $970 million. On a non-GAAP basis, the company estimates gross margin of approximately 65.5%, operating expenses to be slightly up sequentially, interest and other expense of about $20 million, tax rate of approximately 12% and earnings per share in a range of 84–94 cents.

On a GAAP basis, the company estimates earnings per share in a range of 78–88 cents.

ANALOG DEVICES Price and EPS Surprise

Earnings Whispers?

Our proven model does not conclusively show that Analog Devices will beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 89 cents. Therefore, the Earnings ESP for the stock is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Analog Devices holds a Zacks Rank #3 which when combined with a 0.00% ESP makes surprise prediction difficult.

Stocks That Warrant a Look

Here are some stocks that you may want to consider as our model shows these have the right combination of elements to post a positive earnings surprise:

Seagate Technology plc (STX - Free Report) , with an Earnings ESP of +0.95% and Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Western Digital Corp. (WDC - Free Report) , with an Earnings ESP of +4.65% and a Zacks Rank #1.

Broadcom Ltd. (AVGO - Free Report) , with an Earnings ESP of +1.74% and a Zacks Rank #3.

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