Analog Devices (ADI) Q2 Earnings & Revenues Beat Estimates

Analog Devices Inc. ADI reported second-quarter fiscal 2019 adjusted earnings of $1.36 per share, beating the Zacks Consensus Estimate of $1.30. The bottom line decreased 9.3% year over year but increased 2.3% sequentially.

Revenues of $1.53 billion topped the consensus mark of $1.51 billion. However, the top line declined 2% year over year and 0.94% from the fiscal first quarter.

This downside can be attributed to weak performance of the company in consumer and industrial end markets during the reported quarter. Moreover, macroeconomic headwinds negatively impacted the top line.

Nevertheless, Analog Devices’ solid momentum in the communications market remained a positive in the quarter under review. Its strengthening relationships with customers and expanding addressable market size are expected to continue aiding business growth.

Coming to share price performance, shares of Analog Devices have returned 4.3% over a year against the industry’s 11.1% decline.


Revenues by End Markets

Industrial: The company generated revenues of $763.5 million (accounting for 50% of the total revenues), which declined 6% year over year.

Communications: Revenues from this market came in at $359.6 million (24% of revenues), increasing 3% year over year. This can be primarily attributed to rising 5G deployments and 4G technology upgrades.

Automotive: Revenues from this market came in at $249.8 million (16% of revenues), flat with the year-ago quarter.

Consumer: This market generated revenues of $153.7 million (10% of revenues), reflecting a 32% significant decline on a year-over-year basis.

Operating Details

Non-GAAP gross margin contracted 90 basis points (bps) on a year-over-year basis to 70.6%.

As a percentage of revenues, adjusted operating expenses were 29%,expanding 80 bps from the year-ago quarter.

Non-GAAP operating margin contracted 170 bps on a year-over-year basis to 41.5% during the reported quarter.

Balance Sheet & Cash Flow

At the end of the fiscal second quarter, cash and cash equivalents were $713.6 million, up from $605.9 million in the comparable year-ago period.

Long-term debt was approximately $5.61 billion, decreasing from $6.23 billion at fiscal first quarter-end.

Net cash provided by operations was $670.9 million, up from $371.8 million in the fiscal first quarter.

The company generated $596 million of free cash flow during the second quarter.

In addition, Analog Devices returned $302 million to its shareholders through dividends and share repurchases.


For the third quarter of fiscal 2019, Analog Devices expects revenues to be $1.45 billion (+/- $50 million). The Zacks Consensus Estimate for the same is pegged at $1.56 billion.

Non-GAAP earnings are expected to be $1.22 (+/- $0.07) per share. The consensus mark for the same is pegged at $1.38 per share.

The company anticipates non-GAAP operating margins to be approximately 40.5%.

Analog Devices, Inc. Price, Consensus and EPS Surprise


Analog Devices, Inc. Price, Consensus and EPS Surprise

Analog Devices, Inc. price-consensus-eps-surprise-chart | Analog Devices, Inc. Quote

Zacks Rank and Stocks to Consider

Analog Devices currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector include Facebook, Inc. FB, IAC/InterActiveCorp IAC and AXT, Inc. AXTI, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth for Facebook, IAC/InterActiveCorp and AXT is currently projected at 20.2%, 20.5% and 15%, respectively.

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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.

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