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Analog Devices (ADI) Earnings & Revenues Top Estimates in Q1

Zacks Equity Research

Analog Devices Inc. ADI delivered first-quarter fiscal 2019 adjusted earnings of $1.33 per share, beating the Zacks Consensus Estimate by 5 cents. However, the bottom line decreased 10.7% year over year and 14.2% sequentially.

Revenues of $1.54 billion topped the consensus mark of $1.51 billion. However, the top line declined 2% year over year and 3.7% from the previous quarter.

This can be attributed to weak performance of the company in consumer, industrial and automotive end markets during the reported quarter. Moreover, macroeconomic headwinds also impacted the top line negatively.

Nevertheless, the company’s solid momentum in the communications market remained positive. Further, its strengthening relationships with customers and expanding addressable market size are expected to continue aiding business growth.

Coming to share price performance, shares of Analog Devices have returned 20.2% over a year against the industry’s decline of 1.1%.


Revenues by End Markets

Industrial: The company generated $728.1 million revenues (47% of total revenues), declining 6.8% year over year.

Communications: Revenues from this market came in $345.2 million (22% of revenues), increasing 34.1% year over year. This can primarily be attributed to rising 5G deployments and upgradation in 4G technology.

Automotive: Revenues from this market came in $259.5 million (17% of revenues), decreasing 1.6% from the year-ago quarter.

Consumer: This market generated $208.3 million revenues (14% of revenues), dropping significantly 21% on a year-over-year basis.

Analog Devices, Inc. Price, Consensus and EPS Surprise


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

Operating Details

Non-GAAP gross margin contracted 90 basis points (bps) on a year-over-year basis to 70.3%.

Adjusted operating expenses, as a percentage of revenues came in 29.1%, expanding 60 bps from the year-ago quarter.

Non-GAAP operating margin contracted 150 bps on a year-over-year basis to 41.2% during the reported quarter.

Balance Sheet & Cash Flow

As of Feb 2, 2019, cash and cash equivalents were $605.9 million, down from $816.6 million as of Nov 3, 2018.

Long-term debt was approximately $6.23 billion, declining from $6.27 billion at fiscal fourth quarter-end.

Net cash provided by operations was $371.8 million, down from $714.4 million in the previous quarter.

Further, the company generated $280.8 million of free cash flow during the first quarter.

In addition, Analog Devices returned $400 million to its shareholders through dividends and share repurchases.


For the second-quarter of fiscal 2019, Analog Devices expects revenues to be $1.50 billion (+/- $50 million). The Zacks Consensus Estimate for the same is pegged at $1.52 billion.

Non-GAAP earnings are expected to be $1.30 (+/- $0.07) per share. The consensus mark for the same is pegged at $1.31 per share.

Further, the company anticipates non-GAAP operating margins to be approximately 41.3%.

Zacks Rank and Stocks to Consider

Analog Devices carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Benefitfocus, Inc. BNFT, Square, Inc. SQ and Etsy, Inc. ETSY. While Benefitfocus sports a Zacks Rank #1 (Strong Buy), Square and Etsy carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Benefitfocus, Square and Etsy is currently pegged at 25%, 25% and 15%, respectively.

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