On Jan 8, 2014, Zacks Investment Research downgraded
) to a Zacks Rank #5 (Strong Sell). The downgrade can be
attributed to weak guidance and negative estimate revisions over
the last 60 days.
Why the Downgrade?
Analog Devices' fourth-quarter revenues were down 2.4% year
over year and at the lower end of management's guidance of $675
million to $700.0 million. Also, total end customer orders were
down sequentially, with the book-to-bill ratio reporting below
The company provided a weak first-quarter 2014 outlook, with
revenues expected to decrease in the range of -5% to -10%
sequentially. Management expects gross margin to be in the range
of 64.0%-65% and earnings per share in the range of 44 cents-52
cents for the upcoming quarter.
Additionally, the softening demand for semiconductors at the
end of 2013, with some larger chip companies expecting sales to
decrease sequentially in the upcoming quarter, creates near-term
uncertainty. Last month, chipmaker, Texas Instruments, narrowed
its sales guidance, while Semtech Corporation expects sales to
dip in the upcoming quarter. We believe these uncertainties will
remain an overhang on Analog Devices in the near term.
Estimate revision trend reflects bearish sentiment toward
Analog Devices' earnings for the ongoing as well as next
Over the last 60 days, 18 of the 20 estimates for 2014 have
been revised downward, dragging down the Zacks Consensus Estimate
for earnings per share by 13% to $2.26 per share. For 2015, 6 of
the 19 estimates moved south, lowering the Zacks Consensus
Estimate by 12% to $2.62 per share.
Other Stocks to Consider
Not all semiconductor stocks are performing as poorly as
Analog Devices. We recommend
), which has a Zacks Rank #1 (Strong Buy).
M/A-Com Technology Solutions Holdings, Inc.
NXP Semiconductors NV
), both Zacks Rank #2 (Buy) stocks, are also looking good at
ANALOG DEVICES (ADI): Free Stock Analysis
MICROSEMI CORP (MSCC): Free Stock Analysis
MA-COM TECH SOL (MTSI): Free Stock Analysis
NXP SEMICONDUCT (NXPI): Free Stock Analysis
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