Bernstein Warns Of Guidance Risk At Analog Devices

• The share price of Analog Devices, Inc. ADI has appreciated 9.4 percent year to date, although the stock is currently trading below its 52 week high.
• Bernstein’s Stacy A. Rasgon has maintained a Market Perform rating on the company, while lowering the price target from $63 to $57.
• Although the company is expected to report its F4Q15 results largely in-line with the consensus and the guidance, Rasgon expects the F1Q16 guidance to be at risk.

Analyst Stacy Rasgon expects Analog Devices to report its F4A revenue at $910 million and EPS at $0.83, in-line with the consensus and guidance. However, there could be risk to the F1Q (January quarter) guidance, “given the likelihood for a large Consumer falloff after a strong ramp.”

Rasgon expects the January quarter consumer revenues to decline 30 percent quarter on quarter, following the strong ramp over the past several quarters. The current consensus forecast is for a decline of 20 percent.

Analog Devices has high industrial exposure, given that 45 percent of its total revenues are accounted for by this segment. However, company commentary in recent times has suggested that this segment is generally doing ok, “with their application-specific business doing well and the business exposed to broader market showing marginal weakness.”

The revenue estimates for 2016 and 2017 have been lowered from $3.62 billion to $3.52 billion and from $3.86 billion to $3.72 billion, respectively. The EPS estimates for 2016 and 2017 have been lowered from $3.36 to $3.21 and from $3.68 to $3.48, respectively.