Will Analog Devices (ADI) Disappoint this Earnings Season?

Zacks Equity Research

Analog Devices, Inc. (ADI) is set to report third-quarter 2014 results on Aug 19. Last quarter, the company posted 5.4% positive surprise. Let’s see how things are shaping up for this announcement.

Growth Factors this Past Quarter

Analog’s second-quarter 2014 earnings beat the Zacks Consensus Estimate driven by revenue growth across all the product lines coupled with solid expense management. Additionally, total end customer orders improved in the last quarter, especially industrial communications and automotive markets.

Also, gross margins expanded in the quarter due to higher utilization rates and a favorable mix.

For the third quarter, management expects revenues to increase 1% to 5% sequentially. Earnings per share are expected in the range of 60–64 cents.

Earnings Whispers?

Our proven model does not conclusively show that Analog Deviceswill beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 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 63 cents. Hence, the difference is 0.00%.

Zacks Rank: Analog Deviceshas a Zacks Rank #3 (Hold) which when combined with a 0.00% ESP, makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

You could consider other stocks with a positive Earnings ESP and a Zacks Rank #1, 2 or 3 such as:

Perry Ellis International Inc. (PERY), with an Earnings ESP of +7.69% and a Zacks Rank #1 (Strong Buy).

Sanderson Farms, Inc. (SAFM), with an Earnings ESP of +4.92% and a Zacks Rank #1.

Abercrombie & Fitch Co. (ANF), with an Earnings ESP of +20.00% and a Zacks Rank #2 (Buy).

Read the Full Research Report on ANF
Read the Full Research Report on ADI
Read the Full Research Report on PERY
Read the Full Research Report on SAFM


Zacks Investment Research