Analog Devices (ADI) Up 1.7% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Analog Devices (ADI). Shares have added about 1.7% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Analog Devices due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Analog Devices Q1 Earnings Match Estimates

Analog Devices has reported first-quarter fiscal 2024 adjusted earnings of $1.73 per share, which surpassed the Zacks Consensus Estimate by 1.2%. The bottom line declined 37% from the year-ago quarter.

Revenues of $2.51 billion beat the Zacks Consensus Estimate of $2.50 billion. The top line fell 23% from the year-ago quarter.

Softness in the communications, consumer and industrial markets was a major negative.

Nevertheless, the company witnessed strong momentum across the automotive markets in the reported quarter.

Revenues by End Markets

Industrial: The market generated revenues of $1.19 billion (accounting for 48% of the total revenues), which fell 31% year over year. The figure missed the Zacks Consensus Estimate of $1.21 million.

Communications: Revenues from the market were $302.57 million (12% of revenues), decreasing 37% from the year-ago quarter. The figure lagged the Zacks Consensus Estimate of $319 million.

Automotive: Revenues from the market summed up to $739.16 million (29% of revenues), up 9% from the year-ago quarter. The figure surpassed the Zacks Consensus Estimate of $697 million.

Consumer: The market generated revenues of $274.14 million (11% of revenues), reflecting a 22% decline from the year-ago quarter. The figure beat the Zacks Consensus Estimate of $268 million.

Operating Details

The adjusted gross margin contracted 460 basis points (bps) from the year-ago quarter to 69%.

Adjusted operating expenses were $679.41 million, down 7.3% from the year-ago quarter. As a percentage of revenues, adjusted operating expenses were 27%, expanding 440 bps year over year.

The adjusted operating margin contracted 910 bps on a year-over-year basis to 42% in the reported quarter.

Balance Sheet & Cash Flow

As of Feb 3, 2024, cash and cash equivalents were $1.3 billion, up from $958.1 million as of Oct 28, 2023.

The long-term debt was $5.95 billion at the end of first-quarter fiscal 2024 compared with $5.90 billion at the end of fourth-quarter fiscal 2023.

Net cash provided by operations was $1.14 billion in the reported quarter, down from $1.19 billion in the prior fiscal quarter.

ADI generated $916 million of free cash flow in the fiscal first quarter.

Analog Devices returned $606 million to its shareholders in the fiscal first quarter, of which dividend payments accounted for $426 million and repurchased shares amounted to $180 million.

Guidance

For second-quarter fiscal 2024, ADI expects revenues of $2.10 billion (+/- $100 million).

Non-GAAP earnings are expected to be $1.26 (+/- $0.10) per share.

Analog Devices anticipates a non-GAAP operating margin of 37% (+/- 100 bps).

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

The consensus estimate has shifted -22.16% due to these changes.

VGM Scores

Currently, Analog Devices has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Analog Devices has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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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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