Analog Devices Falls Despite Strong Results, Guidance; What Is Wall Street Expecting?

Analog Devices, Inc.'s ADI shares were down more than 1 percent on Wednesday after the company on Tuesday reported fiscal first-quarter revenue and profit above analysts’ expectations, and raised both its guidance for the second quarter and its quarterly dividend from $0.37 per share to $0.40 per share.

Revenue rose 23 percent year-over-year to $772 million, versus consensus the estimate of $761 million; EPS came in at $0.63, versus consensus of $0.61.

The company guided fiscal second-quarter revenues of $810-$830 million, which implies a mid-point above the Street estimates of $807 million.

Several firms weighed in on the stock after the earnings report. Deutsche Bank reiterated a Hold rating, but raised its price target to $60. According to a report published Tuesday afternoon, the firm remains “impressed by the company's stellar execution” and expects it to continue “(through in-line revenue growth and GM/OM expansion), but still await a better entry point as valuation remains fair.”

On the higher guidance, Deutsche Bank analysts raised their fiscal first-quarter revenue estimate to $820 million (from $800 million), and EPS estimate to $0.72 from $0.69. They also augmented 2015 estimate to revenue of $3.35 billion up from 3.27 billion) and EPS of $3.05 (up from $2.91). The analysts introduced CY16 estimates of $3.54 billion –revenue- and $3.35 –EPS.

For its part, Jefferies reiterated a Buy rating and boosted its price target from $60 to $68.

“With semis forecasted to under-ship their OEM customers in 1H15, we [the analysts] think semis are set up for upside surprises, as seen with ADI's outlook. We see a strong link between capital return and valuation, and continue to like ADI for its broad-based exposure, its target to return 80% of FCF to investors, and its op margin expansion potential.”

The firm now models revenues of $3.32 billion for 2015, up from $3.29 billion, and EPS of $2.83, up from $2.81. For 2016, revenues are expected at $3.59 billion, and EPS at $3.14.