Analog stock rebounds from technical weakness
Today, Analog Devices (ADI) reported its fiscal 2019 second-quarter earnings. Earnings beat analyst estimates at a crucial time when the United States and China have raised their tariffs and imposed a ban on Huawei. The tension between the two countries prompted Huawei’s US-based chip suppliers Qorvo and Lumentum to cut their earnings guidance for the June 2019 quarter, which brought some respite to chip stocks.
Stocks of analog chipmakers Texas Instruments (TXN), Microchip, and Analog Devices (ADI) fell to their 200-day MA (moving average) on May 20 and rebounded slightly on May 21 ahead of ADI’s earnings. Had these stocks fallen below their 200-day MA, they would have entered technical weakness. Maxim Integrated (MXIM) is already trading way below its 200-day MA.
ADI’s fiscal Q2 2019 earnings highlights
In the second quarter of fiscal 2019, Analog Devices’ revenue fell 2.2% YoY and 0.6% sequentially to $1.53 billion, beating analysts’ estimates of $1.51 billion. ADI performed better than TXN and MXIM, which reported YoY revenue declines of 5.15% and 16.4%, respectively, for the quarter ended March 2019.
ADI’s profits were hurt more than revenue. Its adjusted gross margin fell 90 basis points YoY to 70.6%, and operating margin fell 170 basis points YoY to 41.5% in the second quarter of fiscal 2019. The operating margin fell faster than gross margin as operating expense fell just 1% YoY, whereas revenue fell 2.2%. ADI’s adjusted EPS fell 9% YoY to $1.36, beating analysts’ estimate of $1.31.
ADI’s fiscal 2019 second-quarter earnings were not affected by the Huawei ban or the 25% tariff on $200 billion worth of Chinese imports. However, ADI’s guidance reflected the impact of macro headwinds.
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