A month has gone by since the last earnings report for Analog Devices, Inc. (ADI - Free Report) . Shares have added about 1.6 % in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is ADI 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 drivers.
Analog Devices Beats Q2 Earnings & Revenue Estimates
Analog Devices Inc. reported second-quarter fiscal 2018 adjusted earnings of $1.45 per share, beating the Zacks Consensus Estimate by 8 cents. The bottom line surged 41% year over year and 3% sequentially. Also, the figure surpassed the guided range of $1.30-$1.44.
Revenues of $1.51 billion topped the consensus mark of $1.47 billion and came close to the higher end of the guided range of $1.43-$1.51 billion. Moreover, the top line surged 32% year over year but remained flat sequentially.
The strong year-over-year growth was driven by a robust performance from the industrial, automotive and communications end-markets.
Revenues by End Markets
Industrial (52% of the total revenues) revenues soared 47% year over year and 6% sequentially to $788.3 million.
Communications (19% of the total revenues) revenues surged 34% year over year and 1% sequentially to $287.9 million.
Automotive (16% of the total revenues) revenues jumped 28% from the year-ago quarter but were down 6% from the last reported quarter to $238.8 million.
Consumer (13% of the total revenues) revenues declined 6% year over year and 17% sequentially to $198.1 million.
Non-GAAP gross margin expanded 200 basis points (bps) on a year-over-year basis and 30 bps sequentially to 71.3%.
Adjusted operating expenses, as a percentage of revenues, declined 220 bps from the year-ago quarter and 20 bps sequentially to 29.2%.
Non-GAAP operating margin expanded 420 bps on a year-over-year basis and 40 bps sequentially to 42.1%.
Balance Sheet & Cash Flow
Analog Devices exited the second quarter with cash and short-term investments of approximately $806.5 million, down from $827.6 million at the end of the prior quarter.
Long-term debt was approximately $6.93 billion, down from $7.38 billion at the end of the last reported quarter.
Net cash provided by operations was $718.5 million, up from $388.7 million reported in the fiscal first quarter.
For the third quarter of fiscal 2018, Analog Devices expects revenues between $1.47 billion and $1.55 billion. Analog Devices projects interest and other expense of approximately $58 million. Earnings are expected in the band of $1.38-$1.52 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been 12 revisions higher for the current quarter.
At this time, ADI has a nice Growth Score of B. Its Momentum is doing a bit better with an A. However, 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.
Based on our scores, the stock is primarily suitable for momentum investors while also being suitable for those looking for growth and to a lesser degree value.
Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. Interestingly, ADI has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.