Why Analog Devices Stock Briefly Jumped 6% Today

Shares of Analog Devices (NASDAQ:ADI) 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-quarter earnings edge out expectations

Wall Street's consensus estimates for the third quarter pointed to adjusted earnings near $1.58 per share on revenues near $2.27 billion. Analog Devices' sales fell 25% year over year, but still beat the average analyst view at $2.31 billion. Earnings dropped 37% lower, exceeding the Street projections at $1.58 per share.

Looking ahead to the fourth quarter, management set the midpoint of their revenue guidance at $2.4 billion, with a bottom-line midpoint at $1.63 per share. Both targets are within a rounding error of the current analyst projections.

That was good enough for a quick price gain in the morning, but investors were less impressed by CFO Rich Puccio's market commentary. Sales to the auto industry will probably stay soft well into the first quarter of 2025, based on order bookings and overstuffed component inventories in that industry.

Auto industry outlook holds the stock back

The bearish market reaction to Puccio's auto industry comments looks a bit drastic. He described a short-term trend, to be followed by "brisk growth" in later parts of 2025. And the auto industry remains an important client segment with plenty of potential growth catalysts.

"We've continued to see more penetration in value capture across all vehicle types, whether it's [internal combustion engines], plug-in hybrid electric, or full electric in the fastest-growing applications," Puccio said.

The company is fighting economy headwinds, but its long-term prospects remain impressive. Analog Devices shares aren't cheap, trading at 36 times trailing earnings and 12 times sales. At the same time, it seems to be near its all-time highs.

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Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.