Earnings Preview: Analog Devices - Analyst Blog
18 Mai 2012 - 12:15PM
Zacks
Analog Devices, Inc. (ADI) is scheduled to
announce its fiscal second-quarter 2012 results on May 22. We
witness only one downward movement in analyst estimates in the
build-up to the release.
Prior-Quarter Synopsis
Analog’sfirst quarter 2012 pro forma earnings missed the Zacks
Consensus Estimate by a couple of cents due to weaker-than-expected
revenue and margins.
Revenue in the quarter was $648.1 million, down 9.5%
sequentially and 11.0% year over year, particularly due to the
weakness in the consumer, communications and industrial end
markets. However, the automotive segment performed well in the
quarter on account of increased use of electronic content in
automobiles, growing dollar content per vehicle for Analog and
higher sales of vehicles.
Gross margin of 63.2% was down both sequentially and year over
year, impacted by lower utilization rates, as Analog tried to keep
internal inventories under control.
Second Quarter Guidance
Management expects second quarter revenue of $655-$675 million
(a 1-4% sequential increase) with the gross margin at 64-64.5%,
operating expenses of around $226 million and diluted EPS of 48-53
cents. For the second quarter, the Zacks Consensus Estimate is
pegged at 51 cents, at the high end of the guided range.
(Detailed earnings results can be viewed in the blog titled:
Analog Devices Optimistic Despite Miss
Agreement of Analysts
Out of the 18 analysts providing estimates for the second
quarter, none made any revision in the last 30 days. For fiscal
2012, only 1 analyst made a downward revision over the same 30-day
time period.
The majority of analysts expect a decent second quarter with
revenue and non-GAAP EPS (including options) in line with the
Street consensus estimates of $666 million and $0.51,
respectively.
The analysts expect to see strength in the automotive end market
and stabilization in industrial and communications (driven by 3G
deployments in China), which have remained weak thus far. They
contend that 3G deployments and growing semiconductor content in
automobiles will drive the company’s future revenue growth. They
also believe that wireless infrastructure is another area of
revenue growth with strength in wireless base station build-outs
owing to continued expansion into China, Europeand North
America.
However, a handful of analysts do not expect a strong quarter
due to some softness in the end markets and uncertainty in the
current environment. They state that demand uncertainty has
continued, particularly, in industrial and communications end
markets, which together comprise roughly 65% of Analog’s total
revenue.
Magnitude of Estimate Revisions
In the past 30 days, there was no change to the Zacks Consensus
Estimate for the second quarter but the estimate for fiscal 2012
dropped a penny to $2.18.
Over the 90-day period, the Zacks Consensus Estimate fell 3
cents to 51 cents for the second quarter and 10 cents to $2.18 for
fiscal 2012.
The weak demand environment and lower-than-expected guidance
announced by management during the first quarter earnings call,
might have prompted the reduction in estimates.
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, we do not expect Analog Devices to see a strong second
quarter due to a tough macroeconomic environment and softness
within the communications and industrial infrastructure
markets.
Analog, which competes with other large analog players, such as
Intersil Corporation, Linear Technology
Corp(LLTC), Maxim Integrated Products
(MXIM) and Texas Instruments (TXN),holds a Zacks
#4 Rank that translates into a short-term ‘Sell’ rating.
ANALOG DEVICES (ADI): Free Stock Analysis Report
LINEAR TEC CORP (LLTC): Free Stock Analysis Report
MAXIM INTG PDTS (MXIM): Free Stock Analysis Report
TEXAS INSTRS (TXN): Free Stock Analysis Report
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