Analog Devices Inc. ADI delivered third-quarter fiscal 2019 adjusted earnings of $1.26 per share, beating the Zacks Consensus Estimate by 4 cents. However, the bottom line decreased 16.6% year over year and 7.3% sequentially.
Revenues of $1.48 billion surpassed the consensus mark of $1.45 billion. However, the top line declined 5% year over year and 3.3% from the previous quarter.
This can be attributed to the company’s weak performance in consumer, industrial and automotive end markets during the reported quarter. Moreover, macroeconomic headwinds affected the top line.
Nevertheless, the company’s solid momentum in the communications market was positive. Further, its strong focus toward product portfolio diversification and innovation remains a tailwind. Also, growth opportunities in electric vehicles and 5G are encouraging and are likely to benefit the company in the near term.
Coming to share price performance, shares of Analog Devices have returned 29% on a year-to-date basis, outperforming the industry’s rally of 27.4%.
Revenues by End Markets
Industrial: The company generated $752.53 million revenues (51% of total revenues), declining 4% year over year.
Communications: Revenues from this market came in $316.46 million (21% of revenues), improving 7% year over year.
Automotive: Revenues from this market came in $227.46 million (15% of revenues), decreasing 9% from the year-ago quarter.
Consumer: This market generated $183.4 million revenues (12% of revenues), plunging 18% on a year-over-year basis.
Analog Devices, Inc. Price, Consensus and EPS Surprise
Analog Devices, Inc. price-consensus-eps-surprise-chart | Analog Devices, Inc. Quote
Non-GAAP gross margin contracted 80 bps on a year-over-year basis to 70.4%.
Adjusted operating expenses, as a percentage of revenues came in 29.6%, expanding 80 bps from the year-ago quarter.
Non-GAAP operating margin contracted 160 bps on a year-over-year basis to 40.8% during the reported quarter.
Balance Sheet & Cash Flow
As of Aug 3, 2019, cash and cash equivalents were $612.2 million, down from $713.6 million as of May 4, 2019.
Long-term debt was approximately $5.3 billion, declining from $5.6 billion at the end of fiscal second quarter.
Net cash provided by operations was $552.5 million, down from $670.9 million in the previous quarter.
Further, the company generated $494 million of free cash flow during the reported quarter.
Additionally, Analog Devices returned $300 million to shareholders through dividends and share repurchases.
For the fourth quarter of fiscal 2019, Analog Devices expects revenues to be $1.45 billion (+/- $50 million). The Zacks Consensus Estimate for the same is pegged at $1.49 billion.
Non-GAAP earnings are expected to be $1.22 (+/- $0.07) per share. The consensus mark for the same is pegged at $1.29 per share.
Further, the company anticipates non-GAAP operating margins to be approximately 40%.
Zacks Rank & Stocks to Consider
Currently, Analog Device carries a Zacks Ranks #4 (Sell).
Some better-ranked stocks in the broader technology sector are Ringcentral, Inc RNG, Garmin Ltd. GRMN and LogMein, Inc LOGM. All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Ringcentral, Garmin and LogMein is currently pegged at 16.32%, 7.35% and 5%, respectively.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 7 stocks to watch. The report is only available for a limited time.
See 7 breakthrough stocks now>>
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
Ringcentral, Inc. (RNG) : Free Stock Analysis Report
LogMein, Inc. (LOGM) : Free Stock Analysis Report
Garmin Ltd. (GRMN) : Free Stock Analysis Report
Analog Devices, Inc. (ADI) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research