Earnings Preview: Analog Devices

Analog Devices (ADI) is expected to report Q3 earnings after the close on Tuesday, Aug. 19, with a conference call scheduled for 5:00 pm ET.

Guidance

The consensus estimate is $669.13M for revenue, according to First Call. Guidance provided on the last earnings call from management for Q3 was better than expectations and calls for EPS of 43c to 45c on revenue of $650M to $665M.

Analyst Views

Deutsche Bank is not expecting any surprises for Q3 results. Given the firm's channel checks, June quarter results of ADI's peers, as well as commentary from distributors, Deutsche is expecting the company to report in-line results.

Events during Q3: On May 28, Barron's talked about consolidation int he semiconductor space, and said Analog Devices could be a potential acquirer as it is one of the largest analog companies behind Texas Instruments (TXN). On May 30, Analog announced that the company and its CEO, Jerald Fishman, have finalized their previously disclosed settlement with the SEC thereby concluding the Commission's investigation regarding the Company's stock option granting practices. In early June, the CEO and CFO took advantage of the stock's strength to chip away at their holdings. On July 24, ADI said it expects its China revenue to grow around 20% this fiscal year versus 23% last year, buoyed by strong demand for its chips for wireless equipment.

Key focus items for the conference call: Bookings/billings, gross and operating margins, inventory and lead times, end-market demand and the restructuring of the DSP business.

Trading pattern: ADI has shown a relatively consistent tendency to widen its next-day move after an after-hours earnings release, doing so in 10 of the last 13 events that Midnight Trader has tracked. Near term, it said the stock has widened in three of four quarters.