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Analog Devices Beats Q2 Earnings Estimates and Outperforms Peers

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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.

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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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