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Analog Devices (ADI) Up 2.3% Since Earnings Report: Can It Continue?

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More than a month has gone by since the last earnings report for Analog Devices, Inc. (ADI - Free Report) . Shares have added about 2.3% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? 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.

Recent Earnings

Analog Devices reported fiscal third-quarter 2017 adjusted earnings of $1.26 per share, which beat the Zacks Consensus Estimate of $1.15.

Revenues

Analog Devices generated revenues of $1.43 billion, up nearly 25% sequentially and a massive 65% year over year. The year-over-year increase was attributable to improved performance across all the markets. Moreover, revenues exceeded the guidance range of $1.34 - $1.42 billion. It also surpassed the Zacks Consensus Estimate of $1.40 billion.

Revenues by End Markets

The Industrial market generated 49% of Analog Devices’ total revenue (up 29% sequentially and 87% year over year). This represents a diversified market for the company, including industrial automation, instrumentation, energy, defense and health care segments. Communications generated 18% of total revenue, up 20% sequentially and 45% year over year. The Automotive segment generated around 16% of Analog Devices’ third-quarter revenues, up 25% sequentially and 69% year over year. The Consumer segment, which Analog Devices clubs with its computing and handset businesses, increased 19% sequentially and 36% year over year. It accounted for 18% of total revenue.

Margins and Net Income

Non-GAAP gross margin was 70.5%, up 120 basis points (bps) sequentially and 450 bps year over year. Analog Devices reported adjusted operating expenses of $437.1 million, up 15% sequentially and 57.4% year over year. Non-GAAP operating margin of 40.5% was up 260 bps sequentially and 640 bps year over year. On a GAAP basis, Analog Devices recorded net profit of $68.9 million or 18 cents compared with $230.4 million or 74 cents in the year-ago quarter.

Balance Sheet

Analog Devices exited the third quarter with cash and short-term investments of approximately $908.6 million, down from $6.3 billion in the prior quarter. Accounts receivables were $692.6 million, up from $630.4 million in the previous quarter. Long-term debt was approximately $8.2 billion. Net cash used for operations was around $364.3 million. Analog Devices spent about $9 million on share repurchases and $166.3 million on cash dividends during the third quarter.

Guidance

For fiscal fourth quarter of 2017, management expects revenues in the range of $1.45 billion to $1.55 billion. On a non-GAAP basis, the company estimates gross margin of approximately 70.5%. Operating expenses are expected to be down roughly 3% to flat. Analog Devices expects interest and other expense of approximately $65 million and tax rate of approximately 10%. Earnings per share are expected in the range of $1.29 to $1.43.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the past month as none of them issued any earnings estimate revisions.

Analog Devices, Inc. Price and Consensus

 

Analog Devices, Inc. Price and Consensus | Analog Devices, Inc. Quote

VGM Scores

At this time, the stock has a poor Growth Score of F, however its Momentum is doing a lot better with an B. However, 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.

The company's stock is suitable solely for momentum based on our styles scores.

Outlook

The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.




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