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ADI Earnings Recap

Posted on: August 19, 2008 - Email Article - Printable Version

Santosh Sankar

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Analog Devices Inc [ADI: 19.29, -0.94 (-4.65%)] posted Q3 earnings after the bell with sales of $659 million and an EPS of $0.44, with revenues enjoying a 7% increase from a year ago. Results were just shy of consensus expectations of $658.9 million in sales and an EPS of $0.45. According to Barron’s, EPS comes in at $.047 with the inclusion of discontinued operations. It is frustrating to see them miss earnings by a mere penny, but the stock seems to be okay, down about 3% after hours.

Management cited a 12% increase in revenues from PC makers and even a 5% increase in consumer electronic chips. Executives at ADI noted that gross margin was steady and profit was in line while operating margin expanded to adhere with long term goals. Outlook looks flat with an EPS range of $0.44 to $0.46. I think the diverse customer base will help ADI keep earnings steady. Industrial and communication chips saw a 1% decline in revenues, I do not believe there is too much to worry about here. Any softness can be balanced out with business from other operating lines. I am happy that the electronic device segment grew revenues and the company should be able to sustain them as the holiday season approaches. Weak holiday sales would impact ADI, but I think the segment should do well for the most part.

I am still for ADI, they have given steady guidance, although flat, it is important to stick with the steady cash flows that are derived from their quality products. I harp on the impressive diversification and believe this can get ADI and its investors through any rough patches in the markets.

-Santosh Sankar

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