) reported first-quarter 2013 earnings of 44 cents per share, in
line with the Zacks Consensus Estimate. Adjusted earnings per
share exclude one-time items, but include stock-based
Analog Devices generated revenues of $622.1 million, down
10.0% sequentially and 4.0% year over year and at the lower end
of the management's revenue guidance range of $612-$653 million
(a 6%-12% sequential decline).
Revenues by End Market
market generated 45% of Analog Devices' total revenue (down 8.0%
sequentially and 3.0% year over year). This is a diversified
market for Analog Devices, including the industrial automation,
instrumentation, energy, defense and healthcare segments.
Management optimism gave way in the last quarter, as the macro
weakness had Analog's industrial customers (both distribution and
OEM) cutting inventories and orders.
Management expects the industrial end market to register
strong growth in the second quarter as order rates have been
improving since early January.
generated 20% of total revenue, down 12.0% sequentially but up
2.0% year over year. The decline was broad based, with the
largest sequential decrease coming from the wireless
infrastructure sub-segment. Though the market performed poorly in
the last quarter, management expects the business to improve, as
there is great focus on 4G and LTE by leading phone makers, such
as Samsung and
). Analog Devices has offerings for both the traditional and 4G
networks, so it stands to gain when there is any increase in
demand. Additionally, it has higher content in the 4G segment,
which along with its position at leading OEMs should remain a
positive factor influencing revenue growth.
segment, which Analog clubs with the computing and handset
businesses, was down 22.0% sequentially and 6% year over year,
due to seasonality.
segment generated around 17% of Analog Devices' first quarter
revenues, down 3.0% sequentially and 11.0% from the year-ago
quarter. Sluggish demand in Europe due to weaker sales affected
Analog's automotive revenues in the last quarter. The growing
electronic content in vehicles remained a positive however, with
demand for products like driver assistance and powertrain
efficiency systems remaining strong.
Revenues by Product Line
The sequential and year-over-year decline in revenues was
broad-based across product lines.
Analog signal processing products (85% of total revenue) were
down 11.0% sequentially and 3.0% year over year. Converters were
down 10.0% sequentially and 3.0% year over year. Amplifier
revenues declined 10.0% sequentially and 4.0% year over year.
Other analog products were down 15.0% and 1.0% from the previous
and year-ago quarters, respectively.
Power management and reference products remained at roughly 6%
of revenues, down 14.0% sequentially and 12.0% from the year-ago
quarter. These products are generally sold into the
consumer/computing markets. Management has refocused the business
over the last few years to concentrate on this fast-growing
Digital Signal Processing (DSPs) (8% of total revenue) were
down 10.0% sequentially and 4.0% from the year-ago level.
Reported gross margin for the quarter was 62.7%, down 110
basis points (bps) sequentially and 50 bps year over year. The
primary reason for the gross margin decline was the change in
sales mix, which favored lower-margin products in the last
Analog reported operating expenses of $222.8.0 million, down
0.3% from $223.4 million incurred in the year-ago quarter.
Research and development and selling, general and administrative
costs, were both up as a percentage of sales from the year-ago
quarters. The net result was a GAAP operating margin of 24.7%
compared with 28.3% in the year-ago quarter.
On a GAAP basis, Analog recorded a net profit of $131.2
million or 42 cents per share compared with $139.4 million or 46
cents per share in the year-ago quarter.
Analog generated adjusted net profit of $136.5 million
compared with$140.5 million in the year-ago quarter. Pro-forma
earnings per share came in at 44 cents, compared with 46 cents in
the last quarter.
Analog exited the first quarter with cash and short-term
investments of approximately $3.99 billion, up from $3.90 billion
in the prior quarter. Trade receivables were $329.6 million, down
from $339.9 million in the prior quarter.
Cash generated from operations was around $158.0 million.
Analog Devices spent $18.3 million on capex, $90.7 million on
cash dividends and $17.0 million on share repurchases in the last
During the quarter, the company announced that its board of
directors has approved a 13% increase in its regular quarterly
dividend, from $0.30 to $0.34 30 cents to 34 cents per
outstanding share of common stock. The dividend will be paid on
Mar 12, 2013, to all shareholders of record at the close of
business on as of Mar 1, 2013.
Management expects second-quarter revenues to increase 4%-8%
sequentially with a gross margin of 64%, operating expenses of
around $224 million, a tax rate of 17% and EPS of 49-55
Analog Devices has a significant percentage of its revenues
coming from the industrial and automotive markets, both of which
are expected to see strong demand in the near term due to an
improved demand environment and healthy order rates expected in
the industrial market. The dividend hike was also quite
encouraging in the last quarter.
Given these positives, it is not surprising that the revenue
guidance was up sequentially but below the consensus expectations
of $666 million. However, with continued uncertainty in key
markets, the shares may remain range bound in the near term.
Currently, Analog has a Zacks Rank #3 (Hold). Other stocks
that have been performing well and are worth a look include
), both with a Zacks Rank #2 (Buy).
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