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Analog Devices (ADI) to Post Q4 Earnings: What's in Store?

Analog Devices, Inc. ADI is set to report fourth-quarter fiscal 2015 results on Nov 24. Last quarter, the company posted a 4.05% positive earnings surprise.

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

Factors at Play

Analog Devices’ third-quarter earnings surpassed the Zacks Consensus Estimate by 3 cents. Revenues of $863.4 million were up year over year and beat our estimates on the back of growth across most of its product lines. However, margins were down sequentially as well as year over year due to unfavorable mix.

The company derives a significant percentage of revenues from the Industrial and Communication markets, which are currently witnessing strong demand, and should boost fourth-quarter results. These markets are likely to grow in the near term backed by increased 4G deployments in the U.S.

However, the company’s high cost structure due to continuous investments and increasing competition in the analog market could affect results in the to-be-reported quarter.

For the fourth quarter, management expects revenues in the range of $880–$940 million and non-GAAP gross margin of approximately 65.5%. Earnings per share are likely to range within 79–87 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 (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 84 cents. Hence, the difference is 0.00%.

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

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

Stocks to Consider

You could consider the following stocks with a positive Earnings ESP and a favorable Zacks Rank:

Casey's General Stores, Inc. CASY, with an Earnings ESP of +12.50% and a Zacks Rank #1 (Strong Buy).

BBVA Banco Francés S.A. BFR, with an Earnings ESP of +10.71% and a Zacks Rank #2 (Buy)

Seadrill Partners LLC SDLP, with an Earnings ESP of +12.00% and a Zacks Rank #2.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
ANALOG DEVICES (ADI): Free Stock Analysis Report
 
CASEYS GEN STRS (CASY): Free Stock Analysis Report
 
SEADRILL PTNRS (SDLP): Free Stock Analysis Report
 
BANCO FRANC-ADR (BFR): Free Stock Analysis Report
 
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