Analog Devices (ADI) Q1 Earnings: What's in the Cards?

Analog Devices, Inc.ADI , one of the world leaders in the design, manufacture and marketing of high-performance analog, mixed-signal and digital signal processing integrated circuits, will report first-quarter fiscal 2017 results on Feb 15, before the opening bell.

The company's earnings surprise history is impressive as it has beaten estimates in all of the last four quarters with an average positive surprise of 8.36%.

Shares of Analog Devices have outperformed the Zacks Semiconductor-Analog and Mixed industry in the last three months. The stock returned 15.2%, while the industry gained 11.5%.

Let's see how things are shaping up for this announcement.

Factors at Play

Analog Devices delivered better-than-expected results for the fourth quarter, surpassing the Zacks Consensus Estimate on both counts. These strong results were driven by strength across all the markets - industrial, automotive consumer and communications as well as the company's increased focus on innovation and operational execution.

In 2015, the company successfully incorporated Hittite and expanded the available opportunities. Moreover, it expects to deliver strong revenue synergies from 2017.

Analog Devices is in the process of acquiring Linear Technology LLTC . The acquisition is expected to make Analog Devices an industry leader across a huge range of products, customer breadth and scale. The deal will also help it to grow significantly in industrial, automotive and communications infrastructure markets.

While its investments are aimed at strengthening the product line and countering increasing competition, the policy of returning cash through dividends and share buybacks is likely to ensure investor loyalty.

For the first quarter of fiscal 2017, management expects revenues in a range of $840 million to $900 million. On a non-GAAP basis, while the company estimates gross margin approximately in the band of 65.5% to 66.0%, operating expenses should be up sequentially. Also, interest and other expenses are expected between $20 million and $25 million, tax rate of approximately 11% and earnings per share in a range of 68-78 cents.

Analog Devices, Inc. Price and EPS Surprise

Analog Devices, Inc. Price and EPS Surprise | Analog Devices, Inc. Quote

Earnings Whispers

Our proven model does not conclusively show that Analog Devices will beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 74 cents. Therefore, the Earnings ESP for the stock is 0.00%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Analog Devices carry a Zacks Rank #3, which when combined with a ESP of 0.00% makes a surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some stocks that you may want to consider as our model shows these have the right combination of elements to post a positive earnings surprise:

Seagate Technology plc (STX), with an Earnings ESP of +0.95% and Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here .

Western Digital Corporation WDC , with an Earnings ESP of +4.65% and a Zacks Rank #1.

Broadcom Ltd. AVGO , with an Earnings ESP of +1.74% and a Zacks Rank #3.

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Western Digital Corporation (WDC): Free Stock Analysis Report

Broadcom Limited (AVGO): Free Stock Analysis Report

Linear Technology Corporation (LLTC): Free Stock Analysis Report

Analog Devices, Inc. (ADI): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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