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Will Analog Devices, Inc. (ADI) Beat Earnings?

Zacks Equity Research

Analog Devices, Inc. (ADI) is set to report third-quarter 2013 results on Aug 20. Last quarter, it posted a -3.85% surprise. Let’s see how things are shaping up for this announcement.

Factors this Past Quarter

Analog’s second-quarter earnings were below the Zacks Consensus Estimate due to higher-than-expected operating expenses. However, revenues were up sequentially driven by the strength in industrial and automotive segments. Analog reported operating margin of 29.0%, which was down 250 basis points (bps) from the year-ago quarter.

Analog provided a tepid outlook for the third quarter, with revenues expected in the range of $655 million to $685 million, lower than analysts’ expectations of $688 million. The company estimates gross margin to be 64.5%, operating expenses of around $226 million, a tax rate of 16.5% and earnings per share of 51 cents–56 cents.

Earnings Whispers?

The Zacks Consensus Estimate for the third quarter stands at 54 cents while that for fiscal 2013 stands at $2.10.

Analog Devices has beaten estimates once in the last four quarters, missed once, while reporting in-line results in the other two. There were no estimate revisions for both the third quarter and fiscal 2013 over the past 30 days. As a result, the Zacks Consensus Estimate for both periods have remained unchanged. The stock carries a Zacks Rank #2 (Buy).

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

Other stocks that have both a positive earnings ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1, 2 or 3 are:

R.R. Donnelley & Sons Company (RRD), Earnings ESP of +2.50% and a Zacks Rank #3 (Strong Buy)

Hewlett Packard (HPQ), Earnings ESP of +2.30% and a Zacks Rank #2 (Buy)

Computer Sciences Corp. (CSC), Earnings ESP of +1.18% and a Zacks Rank #2 (Buy)

Read the Full Research Report on RRD

Read the Full Research Report on HPQ

Read the Full Research Report on CSC

Read the Full Research Report on ADI

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