Analog Devices (ADI) Q1 Earnings Beat, Revenues Down Y/Y
Analog Devices Inc. ADI reported first-quarter fiscal 2020 adjusted earnings of $1.03 per share, beating the Zacks Consensus Estimate by 3%. However, the bottom line decreased 22.6% year over year and 13.4% sequentially.
Revenues of $1.304 billion surpassed the Zacks Consensus Estimate of $1.301 billion. However, the top line declined 15% year over year and 9.6% from the fiscal fourth quarter.
This downside can be attributed to weak performance of the company in all the end-markets served. Moreover, the top line was negatively impacted by macroeconomic headwinds.
Nevertheless, Analog Devices’ deepening focus on efficient capital deployment and executing customer-centric approach remains a positive. Additionally, the company expects stabilization in the end-market demand in second-quarter fiscal 2020.
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 decline of 7% on a year-over-year basis.
Analog Devices, Inc. Price, Consensus and EPS Surprise
Analog Devices, Inc. price-consensus-eps-surprise-chart | Analog Devices, Inc. Quote
Operating Details
Non-GAAP gross margin contracted 180 basis points (bps) on a year-over-year basis to 68.5%.
As a percentage of revenues, adjusted operating expenses were 31.6%, expanding 250 bps from the year-ago quarter.
Non-GAAP operating margin contracted 430 bps on a year-over-year basis to 36.9% during the reported quarter.
Balance Sheet & Cash Flow
As of Feb 1, 2020, cash and cash equivalents were $654.4 million, up from $648.3 million as of Nov 2, 2019.
Long-term debt was approximately $4.7 billion, down from $5.2 billion in the prior quarter.
Net cash provided by operations was $349.6 million in the fiscal first quarter, down from $658 million in the prior quarter.
The company generated $294.8 million of free cash flow during the fiscal first quarter.
Additionally, Analog Devices returned $300 million to shareholders through dividends and share repurchases in the reported quarter.
Guidance
For second-quarter fiscal 2020, Analog Devices expects revenues to be $1.35 billion (+/- $50 million). The Zacks Consensus Estimate for the same is pegged at $1.38 billion.
Outbreak of coronavirus remains a concern for the company.
Non-GAAP earnings are expected to be $1.10 (+/- $0.08) per share. The consensus mark for the same is pegged at $1.13 per share.
The company anticipates non-GAAP operating margins to be approximately 37.5% (+/- 100 bps).
Zacks Rank & Key Picks
Analog Devices currently has a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader technology sector are Itron, Inc. ITRI, NetEase, Inc. NTES and Five9, Inc. FIVN. All the three stocks carry 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 rate for Itron, NetEase and Five9 is currently pegged at 25%, 41.99% and 10%, respectively.
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