Earnings Preview: Analog Devices

Analog Devices (ADI) is expected to report Q4 earnings after market close Monday with a conference call scheduled for 5:00 pm ET.

Guidance

The consensus estimate is 44c for EPS and $655.07M for revenue, according to First Call.

Analyst Views

Analog Devices (ADI) is the leader in the analog semiconductor space. According to Barron's Online on November 12, their checks reveal that analysts have not modified their outlooks much since the company last talked to them in mid-August. That suggests disappointment when the company reports today.

On the last earnings call in August, management provided Q4 EPS guidance of 44c - 46c and revenue growth of 0% - 3% sequentially, or $659M - $679M. Deutsche Bank reduced their estimates for Analog Devices last month following checks and commentary from other Analog companies suggesting a weak start to October. As a result, Deutsche believes October revenue and EPS will likely be at the low end of guided range. Deutsche's estimates are $659M and 44c. Deutsche's checks continue to point to a weak macro environment with both distributors and OEMs focused on aggressively reducing inventories.

The firm says ADI's exposure to the Industrial segment (~50% of sales) makes it especially vulnerable to the broad-based slowdown, with sell-through revenue recognition as a partial positive offset. Although Deutsche reduced their Q109 revenue estimate in October to down -10% q/q versus the Street's down -5% q/q, they would not be surprised if guidance was further below their estimate. Deutsche is forecasting 33c for Q1, while consensus is at 35c.

Key issues for the conference call: commentary on bookings/billings; gross and operating margin guidance; an update on inventory levels and lead times; commentary on end-demand, pricing and competition.