Analog Devices Inc. (ADI) reported first quarter 2011 non-GAAP diluted earnings per share from continuing operations of 66 cents, a penny more than the Zacks Consensus Estimate of 65 cents. When compared on a sequential basis, earnings were down 9.6% but was up 53.5% from the year ago quarter.
Quarterly Highlights
Revenue for the quarter of $729.0 million came in line with the Zacks Consensus Estimate. The reported revenue compares favorably with an increase of 21.0% from the previous year quarter but was down 5.0% sequentially.
Gross profit increased 30.9% from the year ago quarter to $482.2 million. Gross margin increased 5.1 percentage points from the previous year quarter to 66.2%.
Income from continuing opearions was $259 million compared to $286 million in the prior quarter and $166 million on non-GAAP basis in the year ago quarter. Operating margin for the quarter was 35.6%, a decrease of 1.5 percentage points sequentially but an increase of 8.1 percentage points from the previous year quarter.
During the quarter net cash provided by operating activities amounted to $217.0 million and capital expenditures of $26.0 million were incurred along with the payment of cash dividends of $66 million to the share holders.
The company exited the quarter with $3.0 billion in cash and short term investments compared to $2.7 billion in the prior quarter.
The company repurchased 3.1 million of its shares for an approximated amount of $114.0 million.
Dividend
ADI declared cash dividends of 22 cents per outstanding share of common stock, which will be paid on March 23, 2011 to share holders of record at the close of business on March 4, 2011.
Guidance
The management expects second quarter revenue to be in the range of $730 million to $760 million, flat to up 4.0% sequentially, and up 9.0% to 14.0% on a year-to-year basis. Gross margin to increase to approximately 66.5% of sales based on the current mix assumptions, and expects operating expenses to grow in the range of 2.0% to 3.0% primarily as a result of the annual salary increase which took effect at the beginning of the second quarter.
For the balance of the year, management expects expenses to grow slower than revenues. On an earnings per share basis, management anticipates that the diluted EPS from continuing operations for the second quarter will be in the range of 65 cents to 69 cents.
Conclusion
Analyst estimates have remained unchanged in the run up to the earnings release. The average estimate was 65 cents when the company reported. We note that Analog Devices has consistently exceeded estimates over the past year or so. The average surprise in the preceding 4 quarters is a positive 8.95%, and another positive surprise was therefore expected.
The top peers with whom the company competes include Texas Instruments Inc. (TXN) and Fairchild Semiconductor International Inc. (FCS).
Analog Devices is currently a Zacks #2 Rank, which translates into a Buy on a short-term basis. We have a Neutral recommendation on a long-term basis.
ANALOG DEVICES (ADI): Free Stock Analysis Report
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