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Analog Devices (ADI) Q4 Earnings & Revenues Miss Estimates

Zacks Equity Research

Analog Devices Inc. ADI reported fourth-quarter fiscal 2019 adjusted earnings of $1.19 per share, missing the Zacks Consensus Estimate of $1.21. Moreover, the bottom line decreased 19.6% year over year and 12.5% sequentially.

Revenues of $1.44 billion in the quarter missed the Zacks Consensus Estimate by 0.6%.Also, the top line declined 6% year over year and 5.5% from the fiscal third quarter.

This downside can be attributed to weak performance of the company in all end-markets served. Moreover, macroeconomic headwinds negatively impacted the topline.

Nevertheless, Analog Devices’ strengthening relationships with customers and expanding addressable market size are expected to aid business in the near term.

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Analog Devices, Inc. Price, Consensus and EPS Surprise

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

Revenues by End Markets

Industrial: The company generated revenues of $744.1 million (accounting for 52% of total revenues), which was flat year over year.

Communications: Revenues from this market came in at $260.1 million (18% of revenues), decreasing 19% year over year.

Automotive: Revenues from this market came in at $226.1 million (16% of revenues), down 8% from the year-ago quarter.

Consumer: This market generated revenues of $212.8 million (15% of revenues), reflecting a 7% decline on a year-over-year basis.

Operating Details

Non-GAAP gross margin contracted 250 basis points (bps) on a year-over-year basis to 68.4%.

As a percentage of revenues, adjusted operating expenses were 29.6%,expanding 20 bps from the year-ago quarter.

Non-GAAP operating margin contracted 270 bps on a year-over-year basis to 38.8% during the reported quarter.

Balance Sheet & Cash Flow

At the end of the fiscal fourth quarter, cash and cash equivalents were $648.3 million, up from $612.2 million in the prior quarter.

Long-term debt was approximately $5.19 billion, down from $5.3 billion in the prior quarter.

Net cash provided by operations was $658 million, up from $552.5 million in the fiscal third quarter.

The company generated $607 million of free cash flow during the fiscal fourth quarter.

In addition, Analog Devices returned $372 million to its shareholders through dividends and share repurchases.

Guidance

For the first quarter of fiscal 2020, Analog Devices expects revenues to be $1.30 billion (+/- $50 million). The Zacks Consensus Estimate for the same is pegged at $1.41 billion.

Non-GAAP earnings are expected to be $1 (+/- $0.07) per share. The consensus mark for the same is pegged at $1.16 per share.

The company anticipates non-GAAP operating margins to be approximately 36.7% (+/- 100 bps).

Zacks Rank and Stocks to Consider

Analog Devices currently carries a Zacks Rank #4 (Sell).Some better-ranked stocks in the broader technology sector include Advantest Corp. ATEYY, Itron, Inc. ITRI and AMETEK, Inc. AME. While Advantest sports a Zacks Rank #1 (Strong Buy), Itron and AMETEK carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Advantest, Itron and AMETEK is currently projected at 15.5%, 25% and 10.9%, respectively.

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