Analog Devices (ADI) Q1 Earnings Beat, Guidance Impressive

Analog Devices Inc. (NASDAQ:ADI) reported first-quarter fiscal 2018 adjusted earnings of $1.42 per share, beating the Zacks Consensus Estimate by 13 cents. Although the bottom line surged 51.1% year over year, it declined 2.1% sequentially. However, the figure surpassed the guided range of $1.20-$1.36.

Revenues of $1.52 billion topped the consensus mark of $1.50 billion and came close to the higher end of the guided range of $1.44-$1.54 billion. Moreover, the top line surged 54.3% year over year but declined 1.5% sequentially.

The strong year-over-year growth was driven by a robust performance from industrial, automotive and communications end-markets.

Analog Devices, Inc. Price, Consensus and EPS Surprise

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

Revenues by End Markets

Industrial (49% of total revenues) revenues soared 87.4% year over year and 4% sequentially to $743.6 million.

Communications (18.7% of total revenues) revenues surged 63% year over year and 4.1% sequentially to $284.3 million.

Automotive (16.6% of total revenues) revenues jumped 76.4% from the year-ago quarter and 5.1% from the previous quarter to $252.2 million.

Consumer (15.7% of total revenues) revenues declined 11.8% year over year and 23.8% sequentially to $238.5 million.

Operating Details

Non-GAAP gross margin expanded 500 bps on a year-over-year basis and 20 bps sequentially to 71%.

Adjusted operating expenses as percentage of revenues declined 180 bps from the year-ago quarter but increased 110 bps sequentially to 29.4%.

Non-GAAP operating margin expanded 670 bps on a year-over-year basis but contracted 90 bps sequentially to 41.7%.

Balance Sheet & Cash Flow

Analog Devices exited the first quarter with cash and short-term investments of approximately $827.6 million, down from $1.05 billion at the end of the prior quarter.

Long-term debt was approximately $7.38 billion, down from $7.55 billion at the end of the previous quarter.

Net cash provided by operations was $388.7 million, significantly down from $707.4 million reported in the preceding quarter.

Guidance

For the second quarter of fiscal 2018, Analog Devices expects revenues between $1.43 billion and $1.51 billion. The Zacks Consensus Estimate stands at $1.45 billion.

On a non-GAAP basis, the company estimates gross margin in the range of 71-71.5%. Operating expenses are anticipated between $430 million and $440 million.

Analog Devices projects interest and other expense of approximately $60 million.

Earnings are expected in the band of $1.30-$1.44 per share. The consensus mark for the same is pegged at $1.24.

Zacks Rank & Stocks to Consider

Analog Devices holds a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector include NVIDIA (NASDAQ:NVDA) , Intel (NASDAQ:INTC) and ON Semiconductor (NASDAQ:ON) . While NVIDIA sports a Zacks Rank #1 (Strong Buy), both Intel and ON Semiconductor has Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for NVIDIA, Intel and On Semiconductor is projected at 10.25%, 8.42% and 12.23%, respectively.

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