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Analog Devices (ADI) Up 0.4% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Analog Devices (ADI). Shares have added about 0.4% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Analog Devices due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Analog Devices Q4 Earnings & Revenues Beat Estimates
Analog Devices recently reported fourth-quarter fiscal 2024 non-GAAP earnings of $1.67 per share, which surpassed the Zacks Consensus Estimate by 1.83%. The bottom line came at the midpoint of management’s guidance but declined 16.9% year over year.
Analog Devices’ fourth-quarter fiscal 2024 revenues of $2.44 billion beat the Zacks Consensus Estimate by 1.5% and came in line with management’s guidance.
While the consumer end market delivered a strong performance, the persistent weakness in the industrial, communications and automotive sectors has resulted in a 10% year-over-year decline in the top line.
Analog Devices’ Q4 Details
Stronger-than-expected performance in the consumer market was suppressed by softness in three other segments — industrial, communications and automotive.
Industrial: This end market generated revenues of $1.07 billion (accounting for 44% of the total revenues), which fell 21% year over year. The figure missed the Zacks Consensus Estimate of $1.13 million.
Communications: Revenues from the market were $275.6 million (11% of revenues), which decreased 18% from the year-ago quarter. The figure beat the Zacks Consensus Estimate of $270 million.
Automotive: Revenues from the market summed up to $717 million (29% of revenues), down 2% from the year-ago quarter. The figure surpassed the Zacks Consensus Estimate of $662 million.
Consumer: The market generated revenues of $379.7 million (16% of revenues), reflecting 31% growth from the year-ago quarter. The figure beat the Zacks Consensus Estimate of $340 million.
The adjusted gross margin contracted 230 basis points (bps) from the year-ago quarter to 67.9%. The adjusted operating margin was 41.1% in the reported quarter, which contracted 360 bps from the year-ago quarter.
ADI’s FY24 Performance in Brief
Analog Devices’ fiscal 2024 total revenues declined 23% year over year to $9.43 billion. However, the top line surpassed the Zacks Consensus Estimate of $9.39 billion. The industrial market generated $4.3 billion. The automotive market reported revenues of $2.83 billion, followed by communications and consumers with $1.1 billion and $1.2 billion, respectively.
Analog Devices posted non-GAAP earnings of $6.38 per share for fiscal 2024, down 37% from earnings of $10.09 in fiscal 2023. However, earnings surpassed the consensus mark of $6.34 per share.
Analog Devices’ Balance Sheet & Cash Flow
As of Nov. 2, 2024, cash and cash equivalents, and short-term investments were $2.4 billion, down from $2.54 billion as of Aug. 3, 2024.
The long-term debt was $6.63 billion at the end of fourth-quarter fiscal 2024, slightly lower than $6.66 billion at the end of the third quarter.
Analog Devices generated operating cash flow and free cash flow of $1.05 billion and $855 million, respectively, in the fourth quarter. The operating cash flow was $3.9 billion and the free cash flow was $3.1 billion for the fiscal 2024.
During the fourth quarter, it repurchased shares worth $95 million and paid $457 million in dividends. In fiscal 2024, ADI returned more than $2.4 billion to its shareholders, including $616 million in share repurchases and $1.8 billion in dividends.
Analog Devices’ Q1 Guidance
For first-quarter fiscal 2025, management expects net sales of $2.35 billion (+/- $100 million). The company anticipates a non-GAAP operating margin of 40% (+/- 100 bps). Non-GAAP earnings are expected to be $1.53 (+/- 10 cents) per share.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
At this time, Analog Devices has a poor Growth Score of F, a grade with the same score on the momentum front. 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Analog Devices has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Analog Devices is part of the Zacks Semiconductor - Analog and Mixed industry. Over the past month, Semtech (SMTC), a stock from the same industry, has gained 0.5%. The company reported its results for the quarter ended October 2024 more than a month ago.
Semtech reported revenues of $236.8 million in the last reported quarter, representing a year-over-year change of +17.9%. EPS of $0.26 for the same period compares with $0.02 a year ago.
Semtech is expected to post earnings of $0.33 per share for the current quarter, representing a year-over-year change of +650%. Over the last 30 days, the Zacks Consensus Estimate has changed +43.6%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Semtech. Also, the stock has a VGM Score of C.
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