Analog Devices, Inc
. (
ADI
) is scheduled to announce its fiscal fourth-quarter 2012 results
on November 27. We see a few downward revisions in analyst
estimates prior to the earnings release.
Prior-Quarter Synopsis
Analog Devices' third quarter 2012 pro forma earnings of 56
cents were in line with the Zacks Consensus Estimate.
Revenue in the quarter was $683.0 million, up 1.2%
sequentially and just within management's revenue guidance range
of $682-$702 million, attributable to strong sales across a wide
range of communications infrastructure applications, partially
offset by weakness in the automotive and industrial segments.
Gross margin of 65.6% was up sequentially on account of
slightly better utilization rates. However, operating margins
shrunk 43 basis points (bps) sequentially due to special charges
related to restructuring activity.
Fourth Quarter Guidance
Management expects fourth quarter revenue between $685 million
and $715 million (a 0-5% sequential increase), gross margin of
65%, operating expenses of around $231 million and diluted
earnings per share (EPS) of 54 to 60 cents.
(Detailed third quarter earnings results can be viewed in the
blog titled:
Analog's Guidance Disappoints Again
Agreement of Analysts
Out of the 20 analysts providing estimates for the fourth
quarter, 2 analysts made downward revisions while 1 out of 22
analysts providing estimates for fiscal 2012 made a downward
revision in the last 30 days.
The majority of analysts expect fourth quarter
revenue/earnings to come in below Street consensus estimate due
to a weak overall demand environment. They expect poor demand
particularly in the Industrial and Communications end markets,
which together comprise roughly 67% of Analog's total
revenue.
They also expect a weak first quarter guidance due to the
sluggish macro environment and tight inventory management.
However, a few analysts believe that share gains in its
Automotive and Consumer segments could help to mitigate the
decline. The analysts also remain positive about the fact that
the company has none to very little PC exposure and believe that
the consumer business is expected to grow at a robust pace.
Magnitude of Estimate Revisions
In the past 30 days, the Zacks Consensus Estimate remained
unchanged at 57 cents and $2.13 for the fourth quarter and fiscal
2012, respectively. The Zacks Consensus Estimates also remained
unchanged over the 90-day period.
Our Recommendation
Analog Devices is a leading supplier of analog and DSP
integrated circuits. We remain encouraged by the company's
dominant position in many of its product segments, and
meaningfully improved gross and operating margin structures.
However, given recent weak reports by its peers, the continued
macro sluggishness and continued softness within the industrial
infrastructure markets, we do not expect Analog Devices to report
a strong fourth quarter.
Currently, Analog Devices has a Zacks #4 Rank (short-term Sell
rating), reflecting end market weakness and a disappointing
fourth quarter guidance provided by management.
We note that analog peer
Intersil Corporation
(
ISIL
) also carries a Zacks #4 Rank, although others like
Maxim Integrated Products
(
MXIM
) and
Texas Instruments
(
TXN
) carry a Zacks #3 Rank (short-term Hold rating).
ANALOG DEVICES (ADI): Free Stock Analysis
Report
INTERSIL CORP (ISIL): Free Stock Analysis
Report
MAXIM INTG PDTS (MXIM): Free Stock Analysis
Report
TEXAS INSTRS (TXN): Free Stock Analysis
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