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Analog Devices (ADI) And Wal-Mart (WMT): Growth & Income Stocks

By Zacks Investment ResearchStock MarketsDec 21, 2017 04:43AM ET
www.investing.com/analysis/analog-devices-adi-and-walmart-wmt-growth--income-stocks-200275197
Analog Devices (ADI) And Wal-Mart (WMT): Growth & Income Stocks
By Zacks Investment Research   |  Dec 21, 2017 04:43AM ET
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Analog Devices (NASDAQ:ADI) has had an impressive year as they beat both top and bottom line expectations for the 13th consecutive quarter. But this most recent quarter was one of the most impressive as revenues grew by +54% year over year with EPS growth of +38%. Further, the company now controls about +10% of the $40 billion world’s market share in the analog segment.

Outside of internal innovation, the company has recently made two key acquisitions that have already begun to positively impact both the top and bottom lines. In June, Analog acquired Hittite Microwave Corp (HITT) to complement its Radio Frequency (RF) and signal conversion expertise. Then in July, management announced the acquisition of Linear Technology (NASDAQ:LLTC) to increase its presence and portfolio of products in the industrial, communications infrastructure, and automotive sectors.

In order to integrate these two new companies within Analog, the board of directors hired a new CFO, Prashanth Mahendra-Rajah. Prashanth has a solid track record in finance and integration experience. Outside of the integration, he has stated that he is also focused on both operational and spending discipline especially within the engineering segment.

Mr. Mahendra-Rajah’s leadership has already begun to pay dividends for the company and its shareholders, as management increased both earnings and revenue estimates for the next quarter, and is now expecting long-term EPS growth between 8-15%. Another tailwind for the company is the continuation of high demand for semiconductors and analog devices.

This sustained success can be seen in the company’s Price and Earnings Consensus graph below. As you can see the stock price has been on an uptick since the beginning of 2016, and annual earnings estimates have risen as well.

Analog Devices, Inc. Price and Consensus

Analog Devices, Inc. Price and Consensus | Analog Devices, Inc. Quote

Further, earnings estimates have risen for Q1 18, Q2 18, FY 18, and FY 19 over the past 60 days; Q1 18 rose from $1.16 to $1.29, Q2 18 improved from $1.19 to $1.26, FY 18 jumped up from $4.96 to $5.24, and FY 19 was increased from $5.42 to $5.64.

Also, management has stated that they intend to return 80% of annual free cash flows to shareholders. This has been reflected in its solid +2.03% annual dividend payment.

Wal-Mart (NYSE:WMT) . Management’s focus on both its stores and its ecommerce sales has produced impressive earnings data over the past several quarters. The company recently produced its 13th consecutive quarter of positive comparable store sales, and its 12th consecutive quarter of positive comparable store traffic. The company has remodeled many of its existing stores, opened hundreds of new stores, and closed several underperforming locations over the past year. Further, management has commented that another reason for consistent traffic, and sales has been it grocery segment, which is gaining traction in all regions.

Further, Wal-Mart has seen sales increase domestically, internationally, and at their Sam’s Club locations. Specifically, on the international front, 10 out of their 11 regions saw sales growth in the last quarter with Mexico, and China stores seeing the biggest gains.

The company has also been concentrating on its ecommerce presence, and last year they acquired Jet.com to bolster this area and compete against amazon.com. The integration between the two sites has begun to produce strong results as U.S. ecommerce sales rose by +50%, and margins are continuing to expand. Further, gross merchandise volumes (GMV) gained 54% YoY, and total revenues grew by +4.2%. Due to these positive results, management increased EPS guidance for fiscal year 2018 from a range of $4.30-4.40 to $4.38-4.46.

This stock has been on fire as of late, as you can see in the Price and Earnings Consensus Graph below.

Wal-Mart Stores, Inc. Price and Consensus

Wal-Mart Stores, Inc. Price and Consensus | Wal-Mart Stores, Inc. Quote

Wal-Mart also has a huge dividend repurchase program where they bought about $2.2 billion worth of shares, and returned almost $1.5 billion in dividends in just the last quarter. Currently, WMT has an annual dividend yield of +2.07%.

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Wal-Mart Stores, Inc. (WMT): Free Stock Analysis Report

Analog Devices, Inc. (ADI): Free Stock Analysis Report

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Analog Devices (ADI) And Wal-Mart (WMT): Growth & Income Stocks
 

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Analog Devices (ADI) And Wal-Mart (WMT): Growth & Income Stocks

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