Why Is Analog Devices (ADI) Down 5.5% Since Last Earnings Report?
It has been about a month since the last earnings report for Analog Devices (ADI). Shares have lost about 5.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Analog Devices due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Analog Devices Beats Q1 Earnings & Revenue Estimates
Analog Devices reported first-quarter fiscal 2021 adjusted earnings of $1.44 per share, beating the Zacks Consensus Estimate by 9.1%. Further, the bottom line increased 40% year over year but remained flat sequentially.
Revenues of $1.56 billion surpassed the Zacks Consensus Estimate of $1.51 billion. Also, the top line improved 20% year over year and 2.1% from the fourth- quarter fiscal 2020 level as well.
Strong performance delivered by the company across all end-markets, especially the industrial market, drove the year-over-year top line.
Revenues by End Markets
Industrial: The company generated revenues of $855.4 million (accounting for 55% of total revenues), which grew 24% year over year.
Communications: Revenues from this market came in at $281.05 million (18% of revenues), increasing 16% year over year.
Automotive: Revenues from this market summed $245.3 million (16% of revenues), up 19% from the year-ago quarter.
Consumer: This market generated revenues worth$176.7 million (11% of revenues), reflecting 5% growth on a year-over-year basis.
Operating Details
Non-GAAP gross margin expanded 150 basis points (bps) on a year-over-year basis to 70%.
Adjusted operating expenses were $455.5 million, up 10.6% from the year-ago quarter. As a percentage of revenues, adjusted operating expenses were 29.2%, contracting 240 bps year over year.
Non-GAAP operating margin expanded 380 bps on a year-over-year basis to 40.7% during the reported quarter.
Balance Sheet & Cash Flow
As of Jan 30, 2021, cash and cash equivalents were $1.05 billion, down from $1.06 billion as of Oct 31, 2020.
Long-term debt was $4.7 billion at the end of the fiscal first quarter, down from $5.1 billion at the end of the fiscal fourth quarter.
Net cash provided by operations was $427.9 million in the reported quarter, down from $673million in the prior quarter.
The company generated $361 million of free cash flow during the fiscal first quarter.
Additionally, Analog Devices returned $386 million to its shareholders of which it made dividend payments worth $229 million and repurchased shares worth $157 million in the fiscal first quarter.
Guidance
For second-quarter fiscal 2021, Analog Devices expects revenues to be $1.60 billion (+/- $50 million).
Non-GAAP earnings are expected to be $1.44 (+/- $0.08) per share.
The company anticipates non-GAAP operating margins to be 41% (+/- 70 bps).
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
Currently, Analog Devices has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Analog Devices has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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