Analog Devices Inc.
) reported second quarter 2013 earnings of 50 cents per share,
missing the Zacks Consensus Estimate of 52 cents. Adjusted
earnings per share exclude one-time items but include stock-based
Analog Devices generated revenues of $659.3 million, up 6.0%
sequentially but down 2.3% year over year. The sequential growth
was within management's guidance of 4-8% increase and was driven
by the strength in industrial and automotive segments.
In the last quarter, total end customer orders, which include
both OEM and distribution, was up sequentially. Also, the
book-to-bill ratio was slightly above unity.
Geographically, orders improved across all regions, with
particular strengths in North America and Europe.
Revenues by End Market
market generated 47% of Analog Devices' total revenue (up 11.0%
sequentially but down 4.0% year over year). This is a diversified
market for Analog Devices, including the industrial automation,
instrumentation, energy, defense and healthcare segments.
Management expects the industrial end market to register
strong growth in the third quarter as order rates have been
improving and inventory levels remain low.
segment generated around 19% of Analog Devices' second quarter
revenues, up 14.0% sequentially and 3.0% from the year-ago
quarter. Strong vehicles demand in North America and China and
growth in worldwide luxury vehicle led to solid automotive
revenues in the last quarter. The growing electronic content in
vehicles remained a positive, with demand for products like
driver assistance and powertrain efficiency systems remaining
generated 19% of total revenue, down 2.0% both sequentially as
well as 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
leading phone makers, such as Samsung and
), focus more on 4G and LTE. Analog Devices has offerings for
both traditional and 4G networks and therefore stands to gain
from demand ramp. 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 clubbed with the computing and handset
businesses, was down 6.0% sequentially and 5% year over year. It
accounted for 15% of total second quarter revenues.
Revenues by Product Line
On a sequential basis, revenues increased across all product
lines, except in the other analog products. On the contrary,
revenues decreased across all product lines on a year-over-year
basis, except in converters.
Analog signal processing products (85% of total revenue) were
up 5.0% sequentially but down 2.0% year over year. Converters
were up 9.0% sequentially and 1.0% year over year. Amplifier
revenues increased 4.0% sequentially and declined 7.0% year over
year. Other analog products were down 4.0% sequentially but up
2.0% from year-ago quarters.
Power management and reference products remained at roughly 7%
of revenues, up 11.0% sequentially but down 5.0% from the
year-ago quarter. These products are generally sold in the
consumer/computing markets. Management has refocused the business
over the last few years to concentrate on this fast-growing
Digital Signal Processing (DSPs) (9% of total revenue) was up
11.0% sequentially but down 6.0% from the year-ago level.
Reported gross margin for the quarter was 64.0%, up 130 basis
points (bps) sequentially but down 120 bps year over year. The
primary reason for the sequential increase in gross margin was
attributable to higher factory utilization and lower
Analog reported operating expenses of $230.8 million, up 1.5%
from $227.5 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 29.0% compared with
31.5% in the year-ago quarter.
On a GAAP basis, Analog recorded a net profit of $164.5
million or 52 cents per share compared with $162.9 million or 53
cents per share in the year-ago quarter.
Analog generated adjusted net profit of $156.7 million
compared with $162.1 million in the year-ago quarter. Pro forma
earnings per share came in at 50 cents compared with 53 cents in
the last quarter.
Analog exited the second quarter with cash and short-term
investments of approximately $4.17 billion, up from $3.99 billion
in the prior quarter. Trade receivables were $333.9 million, up
from $329.6 million in the prior quarter.
Cash generated from operations was around $252.2 million.
Analog Devices spent $26.2 million on capex, $104.4 million on
cash dividends and $4.5 million on share repurchases in the last
During the quarter, the company announced that its board of
directors has declared a cash dividend of 34 cents per
outstanding share of common stock. The dividend will be paid on
Jun 11, 2013 to all shareholders of record at the close of
business on May 31, 2013.
Management expects third quarter revenues to be in the range
of $655 to $685 million, up 1.6% sequentially but lower than
analyst 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 51-56 cents.
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.
Given these positives, it is not surprising that the revenue
guidance was up sequentially but below analyst expectations. 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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