Analog Devices, Inc. (NASDAQ:ADI) Citi's 2024 Global TMT Conference September 4, 2024 1:20 PM ET Company Participants Mike Lucarelli - VP of Finance, IR, FP&A Conference Call Participants Chris Danely - Citi Chris Danely Everyone, I'm Chris Danely, your friendly neighborhood semiconductor analyst here. It's our pleasure next to have one of our topics, Analog Devices. The normally scheduled program of Vivek, the VP of Ops, is not here today. So being as it's baseball season, we've got the best pinch hitter i ...

Analog Devices, Inc. (NASDAQ:ADI) Citi's 2024 Global TMT Conference September 4, 2024 1:20 PM ET Company Participants Mike Lucarelli - VP of Finance, IR, FP&A Conference Call Participants Chris Danely - Citi Chris Danely Everyone, I'm Chris Danely, your friendly neighborhood semiconductor analyst here. It's our pleasure next to have one of our topics, Analog Devices. The normally scheduled program of Vivek, the VP of Ops, is not here today. So being as it's baseball season, we've got the best pinch hitter i ...

Industry Overview - The analog/mixed signal semiconductor market is expected to strengthen through year-end 2023, driven by reduced inventories in computing and smartphone markets [1] - The World Semiconductor Trade Statistics (WSTS) projects double-digit growth in semiconductors for 2023, with memory demand increasing by 76.8% and logic demand by 10.7% [1] - The semiconductor industry is cyclical, with players often serving multiple markets to offset individual seasonality [3] Growth Prospects - The semiconductor market is forecasted to grow by 17.4% in 2024, with memory demand rebounding by 70.5% after a weak 2023 [4] - The automotive chip demand is expected to grow by 13.2% in 2024, with a CAGR of 11.8% from 2024 to 2028 [4] - AI is a significant driver for growth, with AI chip revenue projected to grow by 33% this year [4] Market Challenges - The industrial end market remains sluggish despite long-term growth prospects due to macroeconomic and geopolitical uncertainties [2][5] - High interest rates in the U.S. are leading to lower investments in manufacturing, impacting employment numbers [5] - Geopolitical tensions, particularly between the U.S. and China, pose risks to the semiconductor supply chain [7] Current Valuation and Performance - The Zacks Semiconductor – Analog and Mixed industry ranks 220, indicating weak near-term prospects [8] - The industry has gained 18.3% over the past year, compared to 30.3% for the broader sector and 24.9% for the S&P 500 [10] - The industry currently trades at a forward P/E ratio of 29.1X, which is a premium to the S&P 500's 21.7X but a discount to the broader technology sector's 26.1X [11] Company Insights - Analog Devices, Inc. (ADI) is well-positioned for long-term growth, with a strong product development pipeline and customer engagement [12][13] - ADI's earnings estimates for fiscal 2024 have increased by 1.4%, while 2025 estimates have decreased by 6.6% [13] - Magnachip Semiconductor Corp. (MX) has seen a return to growth in its Power Solutions business, with improvements across various markets [16][17] - MX's earnings beat the Zacks Consensus Estimate by 34.4% in the last quarter, but the company faces a projected decline in revenue and earnings for 2024 [18]

Investment Rating - The report does not explicitly mention an investment rating for Analog Devices, Inc (ADI) [1][2][3] Core Views - ADI's FY2024Q3 revenue of $2.312 billion exceeded the guidance midpoint of $2.27 billion, indicating a recovery from the cyclical trough [1][4] - Adjusted gross margin was 67.9%, up 1.2 percentage points quarter-over-quarter (QoQ) but down 4.3 percentage points year-over-year (YoY) [1][4] - Net income was $392 million, up 29.8% QoQ but down 55.3% YoY, with a net profit margin of 16.96% [1][4] - Adjusted EPS was $1.58, up 12.9% QoQ but down 37% YoY [1][4] Revenue Breakdown by End Market - Industrial market revenue was $1.059 billion (46% of total revenue), up 4.32% QoQ but down 37% YoY [1][7] - Automotive market revenue was $670 million (29% of total revenue), up 1.83% QoQ but down 8% YoY [1][7] - Communications market revenue was $267 million (12% of total revenue), up 10.72% QoQ but down 26% YoY [1][7] - Consumer market revenue was $317 million (14% of total revenue), up 29.13% QoQ and up 3% YoY, marking the first YoY growth since 2022 [1][7] Capital Expenditures and Inventory - FY2024Q3 capital expenditures were $154 million, with full-year 2024 capex expected to be around $700 million [1][6] - Inventory at the end of FY2024Q3 was $1.428 billion, down $51 million QoQ, with inventory turnover days decreasing from 192 to 178 days [1][6] FY2024Q4 Guidance - ADI expects FY2024Q4 revenue to be between $2.3 billion and $2.5 billion (QoQ -0.52% to +8.1%, YoY -15.3% to -8%) [1][10] - Adjusted EPS is expected to be between $1.53 and $1.73 (QoQ -3.2% to +9.5%, YoY -23.9% to -13.9%) [1][10] - Industrial and consumer businesses are expected to grow, while automotive business is expected to decline [1][10] Management Commentary - ADI's management believes the company has passed the cyclical trough, with improving customer inventory levels and order trends in most markets [13][16] - The industrial market, ADI's largest and most diversified segment, is expected to see continued growth, particularly in automation and energy efficiency [13][14] - The automotive market is facing challenges due to production cuts and extended inventory digestion periods, but ADI remains optimistic about long-term growth in electrification and software-defined vehicles [16][19] Key Takeaways from Earnings Call - ADI's channel inventory is near the lower end of the target range (7-8 weeks), and the company is prepared for expected demand growth in 2025 [18][23] - Industrial and consumer markets are expected to drive growth, while automotive market recovery may be slower [25][27] - ADI's pricing environment remains stable, with no significant pressure on gross margins [31]

Investment Action - Analog Devices (ADI) has been recommended as a buy due to the belief that it has entered a growth cycle, with 3Q24 showing its first sequential growth since 3Q21 [2][10] - The automotive segment is currently weak, but a recovery is anticipated [2][10] Earnings Review - ADI reported 3Q24 earnings with revenue of $2.31 billion, a 7% sequential increase, surpassing consensus expectations of $2.27 billion [3] - By segment, automotive was flat, industrial grew 6%, communications increased by 10%, and consumer rose by 29% [3] - Gross margin was strong at 67.9%, exceeding consensus by 60 basis points, leading to a net margin expansion of 300 basis points and a sequential EPS growth of 13% [3] Market Dynamics - 2Q24 was identified as the trough of the cycle, with positive sequential growth indicating the start of a recovery [4] - Bookings (excluding automotive) have increased for four consecutive quarters, and the book-to-bill ratio is around 1x, indicating improving demand [4] - In China, bookings grew by double digits across all segments, suggesting a strong recovery momentum [4] - The automotive segment remains weak, primarily due to auto OEMs reducing inventory in response to poor sales outlook [4] Inventory Management - ADI has demonstrated robust inventory management, achieving the largest year-over-year decline in inventory among peers [5] - As of 3Q24, channel inventory is approximately 7 weeks, aligning with management's long-term target [5] Financial Projections - Revenue is projected to rebound to approximately $12 billion, with expectations for EBIT margin to inflect towards previous peak margins of around 51% [7] - Adjustments have been made to growth expectations due to automotive segment weakness, but overall growth acceleration is still anticipated [8] Conclusion - The recommendation remains a buy as ADI is positioned to capitalize on the growth cycle, supported by prudent inventory management and improving macroeconomic conditions [10]

Analog Devices TodayADIAnalog Devices$221.91 -5.59 (-2.46%) 52-Week Range$154.99▼$244.14Dividend Yield1.66%P/E Ratio51.85Price Target$245.64Add to WatchlistAnalog Devices NASDAQ: ADI is not out of the weeds, and it will take time to recover fully, but the bottom is in for the semiconductor business, and the rebound is underway. The takeaway from the FQ3 results is that sequential growth persists, and improving client inventory and order volumes point to YoY growth resuming by FQ1 2025. This means investors ...

Analog Devices, Inc. ADI posted better-than-expected third-quarter financial results on Wednesday.The company's revenue declined 25% year-on-year to $2.31 billion, beating the analyst consensus estimate of $2.27 billion. Adjusted EPS of $1.58 beat the analyst consensus estimate of $1.50."Improved customer inventory levels and order momentum across most of our markets position us to grow again sequentially in our fourth quarter, increasing our confidence that we are past the trough of this cycle. However, ec ...

draganab/E+ via Getty Images Analog Devices (NASDAQ:ADI) reported its third quarter FY24, sending shares higher after management announced a beat on top and bottom lines with sequential growth after four quarters of sequential sales decline. The company reported sales up roughly 7% Q/Q and down 25% Y/Y to $2.31B versus estimates of $2.27B and adjusted EPS of $1.58, ahead of estimates of $1.50. The real surprise was from management's outlook for Q4; the company expects sales of $2.40B, +/- $100M, for 4% ...

Why did Analog Devices' shares spike and then settle on Wednesday morning?Shares of Analog Devices (ADI 2.92%) jumped as much as 6% higher on Wednesday morning. The maker of high-performance analog and mixed-signal chips peaked at 10:20 a.m. ET and backed down to a 2.2% gain in the afternoon. The stock jumped as Analog Devices reported analyst-stumping third-quarter results and in-line guidance for the next quarter. It backed down when management provided cautious market analysis on the earnings call.Third- ...

Analog Devices Inc. (ADI) has reported third-quarter fiscal 2024 adjusted earnings of $1.58 per share, which surpassed the Zacks Consensus Estimate by 5.3%. The bottom line declined 37% from the year-ago quarter.Revenues of $2.31 billion beat the Zacks Consensus Estimate of $2.27 billion. However, the top line fell 25% from the year-ago quarter.Softness in the industrial, communications and automotive end-markets led to the year-over-year decline in the top line.Revenues by End MarketsIndustrial: The market ...