Analog Devices’ Upcoming Q2 Earnings Preview

Analog Devices (NASDAQ:ADI) saw its shares rise by more than 5% in pre-market today following better-than-expected Q2 results and guidance.

For Q2, the company reported earnings per share (EPS) of $1.40, exceeding the Street estimate of $1.26. Revenue was $2.16 billion, above the consensus forecast of $2.1 billion.

The adjusted gross margin for the quarter was 66.7%, slightly below the projected 67.1%, while the adjusted operating margin was 39%, surpassing the expected 37.7%.

Looking ahead to Q3/24, Analog Devices projects EPS between $1.40 and $1.60, significantly higher than the Street expectation of $1.35. Revenue is anticipated to be between $2.17 billion and $2.37 billion, compared to the consensus of $2.16 billion.

CEO and Chairman Vincent Roche noted that despite ongoing macroeconomic and inventory challenges, the company delivered second-quarter revenue above the midpoint of its outlook. He attributed the strong performance to a resilient business model and disciplined cost control, which resulted in higher-than-expected profitability and EPS.

Roche also expressed optimism about the future, citing stabilizing inventory rationalization and improving new orders as indicators of a potential cyclical recovery starting in the third quarter.

Analog Devices, Inc. (NASDAQ:ADI) is gearing up to release its quarterly earnings report on Wednesday, May 22, 2024, before the market opens. The company, a leading semiconductor manufacturer, is facing Wall Street's expectations of earnings per share (EPS) of $1.26 and revenue estimates of approximately $2.1 billion for the quarter. This report is particularly significant as it provides insights into the company's financial health and its operational performance in a competitive semiconductor industry.

The anticipation surrounding ADI's earnings report is rooted in the company's forecast, which suggests a challenging quarter ahead. According to Zacks Investment Research, ADI expects its second-quarter fiscal 2024 results to show revenues of $2.10 billion, plus or minus $100 million, aligning with the Zacks Consensus Estimate. However, this figure represents a substantial decline of 35.5% from the revenue reported in the same quarter of the previous year. Furthermore, the adjusted EPS is anticipated to be $1.26, with a possible variation of plus or minus $0.10, marking a steep fall of 55.5% from the EPS reported in the year-ago quarter.

The backdrop of these projections is ADI's historical performance, which has seen the company surpass earnings estimates in two of the trailing four quarters, miss once, and match estimates on another occasion, with an average beat of 0.6%. Despite this relatively positive track record, the upcoming quarter's expectations are tempered by softness in key markets such as industrial, consumer, and communication sectors. This softness is likely to have a significant impact on the company's performance, as highlighted by Zacks Investment Research.

Moreover, the slight downward revision of 0.3% in the consensus EPS estimate over the last 30 days indicates a cautious stance from analysts, reflecting concerns over the company's ability to navigate the challenges in its operational environment. This adjustment in earnings projections is crucial as it often influences investor reactions to the stock, potentially affecting ADI's stock price following the earnings announcement.

As ADI prepares to unveil its financial results, the semiconductor industry and investors alike will be keenly watching. The company's performance, particularly in light of the anticipated declines in earnings and revenue, will offer valuable insights into its resilience and strategic direction amidst a competitive and rapidly evolving market landscape.

Edward Jones upgraded Analog Devices (NASDAQ:ADI) from Hold to Buy, recognizing the company's advantageous position to gain from the increasing demand for automation.

The analysts pointed out that the expansion of automated and connected devices across various sectors will likely lead to a higher number of chips required per device. This trend is expected to benefit Analog Devices significantly.

Furthermore, the firm anticipates a surge in chip demand due to the evolution of the automotive industry. Cars with advanced features and a shift towards more electric vehicles are predicted to necessitate a greater number of chips per vehicle.

The analyst also noted the unique advantages of Analog Devices' hybrid manufacturing approach. This strategy is believed to yield higher cash flow and require less capital investment compared to industry peers, thus enhancing the company's financial flexibility.

Currently, ADI's shares are trading at about 20 times Edward Jones' fiscal 2025 earnings estimate. This valuation aligns with its historical average. Despite ADI's recent underperformance compared to other technology stocks, partly due to a slowdown in chip demand and growth, the analysts see the shares as attractively valued and believe in the company's potential for recovery and growth.

Analog Devices (NASDAQ:ADI) shares dropped more than 7% on Wednesday after the company reported its Q2 earnings results. While both EPS of $2.83 and revenue of $3.26 billion came in better than the Street estimates of $2.75 and $3.21 billion, respectively, guidance missed the consensus estimates.

The company continued benefiting from rising semiconductor content in Automobile, Communications, and Industrial markets during the quarter.

For Q3/23, the company expects EPS to be in the range of $2.42-$2.62, compared to the Street estimate of $2.65, and revenue in the range of $3-$3.2 billion, compared to the Street estimate of $3.16 billion.

RBC Capital analysts provided their outlook on Analog Devices (NASDAQ:ADI) ahead of the upcoming Q2 earnings, scheduled on May 24.

The analysts see an in-line setup to Q2 Street sales/EPS estimates of $3.2 billion/$2.75 but stand cautious on Q3 as semi correction progresses.

Counter to peers, management posted beat/raise results led by auto/industrial. Industrial (52% of total revenue) was up 26% year-over-year in Q1 led by automation, sustainable energy, instrumentation, and test. Auto (22% of total revenues) up 30% year-over-year in Q1. According to the analysts, Q2 is expected up slightly.

Analog Devices (NASDAQ:ADI) shares gained more than 7% on Wednesday after the company reported its Q1 results, with EPS of $2.75 coming in better than the Street estimate of $2.61. Revenue of $3.25 billion beat the Street estimate of $3.15 billion.

While lead times have shortened for much of the portfolio and longer-term cancellations have risen, the company cited still-strong demand in its core end markets of Industrial and Automotive and resumed its more bullish tone that it adopted on its November earnings call.

For Q2, the company expects EPS in the range of $2.65-$2.85, compared to the Street estimate of $2.42. Q2 revenue is seen at $3.1-3.3 billion, beating the Street estimate of $3.03 billion, once again bucking the trend of its competitors which almost universally guided below Street expectations this earnings season.