In this week’s video I discuss two companies that recently reported better than expected earnings results, and that have continued upside going into the next quarter. They are Analog Devices (ADI), and Dine Brands Global (DIN).
Analog Devices (NASDAQ:ADI) is a world leader in the design, manufacture and marketing of a broad portfolio of high performance analog, mixed-signal, and digital signal processing (DSP) integrated circuits (ICs) used in virtually all types of electronic equipment. Since their inception in 1965, they have focused on solving the engineering challenges associated with signal processing in electronic equipment. Used by over 100,000 customers worldwide, their signal processing products play a fundamental role in converting, conditioning, and processing real-world phenomena such as temperature, pressure, sound, light, speed, and motion into electrical signals to be used in a wide array of electronic devices.
ADI announced earnings on February 28th, where they easily beat both the Zacks consensus earnings and revenue estimates for the 14th consecutive quarter. On a year over year basis, the company posted +51.1% earnings growth and +54.4% revenue growth. During the quarter the company saw continued strong demand for analog semiconductors which helped all segments post revenues above expectations. Further, the Linear Technology (NASDAQ:LLTC) acquisition in March of 2017 has helped reduce overall costs, and aided the bottom line results during the quarter.
Due to the continued success in the semiconductor sector, and the strong outlook for the sector going forward, management gave better than expected guidance for Q2 18; they now expect revenues to come in between $1.43-1.51 billion, above the previous expectation of $1.43 billion, and EPS to be between $1.30-1.44, ahead of the previous expectation of $1.24.
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To add to the impressive earnings report, the Board of Directors approved a +7% increase in its quarterly dividend bringing the quarterly payment to $0.48, or $1.92 on an annual basis for an annual dividend yield of +2.1%.
These positive announcements caused B. Riley FBR Inc. to raise its target price from $113 to $122.
As you can see in the Price and Earnings Consensus graph below, ADI has been on an upwards trend since the beginning of 2016.
Due to the earnings report being so recent, there have not been any analysts estimate revisions, but this should change over the next several days.
Dine Brands Global (NYSE:DIN) , previously known as DineEquity, Inc., was created from a foundation established by IHOP - an American icon to their guests and a franchising company focused on providing strategic, visionary leadership for their franchisees, unparalleled opportunities for our team members, and enhancing value for their shareholders. By bringing Applebee's together with IHOP, they made a bold, new commitment to their brand-revitalization abilities and to the power of franchising. DineEquity has successfully made their two businesses more powerful and more successful than either brand could have been apart.
Dine Brands Global also recently reported earnings where they beat both top and bottom line expectations. The big take away from the report was the improved success in the Applebee’s segment which was due to its value offerings, and advertising strategies that have progressed faster than expected. This operational execution turnaround saw comparable same restaurant sales improve by +1.3%, and caused management to increase FY 18 comp sales expectations (flat to +3.0%). The success of Applebee’s is also expected to improve royalty collections in 2018.
Further, the long term outlook has significantly improved under new CEO Steve Joyce who has a solid track record of operating multi-brand companies, and franchise models. He and his management team introduced a 5 year plan which includes; sustaining positive comparable same restaurant sales, unit growth domestically for the IHOP franchise (expected to open between 85-100 restaurants in 2018), cost management measures, dividend payments with a 35-45% payout ratio of adjusted free cash flows, and new acquisitions.
The earnings report and future goals set by management caused the stock price to jump up by over +16%. The graph below shows the huge improvement in the stock price and future earnings estimates.
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To add to the positive news, the company also pays a big +5.1% annual dividend yield. So we have a solid turnaround story, with a very nice dividend.
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