Analog Devices Results Jump With Q2 Results, Highest Expectations (ADI)

Analog devices (NASDAQ:ADI) increased by over 7.5% on Wednesday after the analog chip supplier reported fiscal second-quarter results and guidance that easily topped Wall Street expectations.

For the period ended May 4, Analog earned an adjusted $1.40 per share, above estimates of $1.27 per share. Revenues dropped up 33.7% year over year to $2.16 billion, beating estimates of $2.11 billion. Chief Executive Vincent Roche said in a statement he said believes customer stocks are stabilizing.

“We believe inventory rationalization across our broad customer base is stabilizing, paving the way for us to return to sequential growth in the third quarter,” Roche said. “This, combined with improved new orders, makes us optimistic that we are at the beginning of a cyclical recovery.”

KeyBanc Capital Markets analyst John Vinh called the second-quarter results “strong” and said they reflected strength in the industrial and consumer sectors.

Bank of America analyst Vivek Arya, who has a Buy rating and a $225 price target on Analog, said he thinks the company has “broadly exceeded” cyclical lows, with upside expected in the second half of the year.

Looking ahead to the third quarter, Analog Devices expects revenue of $2.27 billion, plus or minus $100 million, above the $2.17 billion estimate. Operating margin is projected to be 20.1% plus or minus 200 basis points, while adjusted operating margin is expected to be 40% plus or minus 100 basis points.

Adjusted earnings per share are forecast to be $1.50 per share, plus or minus $0.10, above the estimate of $1.36 per share.

Rivals Texas Instruments (TXN), ON Semiconductor (ON) and NXP Semiconductors (NXPI) all shot higher following the results.

(This story has been updated to include analyst commentary.)